Q.: What is title insurance and why should I purchase an owner’s policy if there has been a title search done on the property?

A.: Although title searches are performed by experienced title examiners, a title search is simply a search of public records and substantial defects may not be discovered.

An owner’s policy of title insurance is a contract that protects you, according to the contract terms, against loss or damage due to title defects. This contract is backed by the known assets and reserves of the title insurance underwriter and serves as a written guarantee that your underwriter will undertake, at its own expense, the defense of your title in all legal actions or proceedings alleging the title to be other than as insured.

For a one-time premium, paid during the closing process, an owner’s policy of title insurance protects against future losses arising out of events that may have happened in the past.

So what does title insurance protect against? To name a few:

-- Mistakes in recording of legal documents.

-- Forged deeds, releases or wills.

-- Undisclosed or missing heirs, including spouses.

-- Deeds by persons of unsound mind.

-- Deeds by minors.

-- Deeds executed under invalid/expired power of attorney.

-- Liens for unpaid taxes.

-- Fraud protection.

Everyone understands the risk of human error in such a complex process. However, where your property title is concerned, there is no room for error. A deed merely transfers the property rights from the seller to the buyer. Title insurance companies may cover any or all of the following events that may jeopardize a clear title.

Despite an extensive title search, there may be liens or claims to the property that remain undiscovered. Title insurance protects you from liens due to unpaid taxes, liens due to unpaid debts, mining, oil or air rights.

Any mistakes in the “chain of title.”

Lawsuits or claims against the property itself.

Insurance that all taxes and assessments have been paid.

Any additional hidden risks.

There are two types of title insurance. The lender’s policy provides the following protection to the lender until the mortgage is paid in full.

Lenders may be automatically covered to 125 percent of the loan amount.

Mechanics lien coverage protects the lender for work done after the date of policy.

Subdivision coverage protects the lender against an improperly created subdivision.

Lenders may also protect against home improvements implemented after the policy date without proper permits.

The owner’s policy may provide some or all the following protection to the new property owner. These are just a few examples of the situations covered by the owner’s policy.

The policy may protect the new owner from liability for undischarged liens and/or mortgages by prior owners.

Mechanics lien coverage protects the owner for work implemented prior to the date of policy, unless the work was previously agreed upon.

Subdivision protection may protect against an improperly created subdivision.

Some agreed upon amount may be covered if an existing structure needs to be removed because the prior owners:

-- Failed to obtain a building permit.

-- Encroached on a neighbor’s property.

-- Violated restrictions.

Owner’s title insurance requires a one-time premium, and no deductibles apply. It’s a risk no one should take. Buy title insurance.

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For more information about buying or selling a home, visit gmnbr.org.

This information has been provided by the Greater Manchester/Nashua Board of Realtors in conjunction with the New Hampshire Union Leader’s Advertising Department. Any questions about the content should be directed to the realty board at 166 S. River Road, Bedford 03110 or by email to info@gmnbr.org.