First of all what is title insurance?
Title Insurance insures against financial loss from possible defects in the title to real property. It is designed to protect an owner’s or a lenders interest in real property against loss due to defects in the title, liens or other defects or other matters that would inhibit one’s ability to enjoy all rights and usage of real property.
Title Insurance will defend or cause to be defended a property owner or a lender for a lawsuit brought against them attacking the clear title or potentially reimburse the insured for the actual loss incurred up to the amount of insurance provided by a title policy.
Typically, there are two types of policies, an owner’s policy which protects the owner of the property and a lender’s policy which protects the lender if there is a loan against the property. There are a variety of other specialty policy’s but generally the owner’s and the lender’s policy are the mainstream.
A Title Company is a company that is highly regulated, scrutinized, and vetted by various state and federal agencies and is allowed to offer title insurance of an approved Title Insurer. This being the case you can make the argument that it is better to use a Title Company versus a Title Insurance Company as you are in essence receiving additional backing of the Title Company and Title Insurance Company.
Here is how it works. When you receive a title policy from a Title Company your, are receiving their investigation and scrutiny of the property in question and all of their due diligence to ensure that you receive “clear title” to the property. The policy that you receive is guaranteed by the Title Company and it is also insured by the Title Insurance Company. Additionally, the Title Company and the Title Insurance Company have Errors and Omissions insurance so, in essence you are receiving the assurance of the Title Company and insurance of the Title Insurance Company thereby giving you virtually 4 insurances on the property.
Lastly, is very important to know that as a home buyer or a home seller it is your right to choose the Title Company of your choice. The Real Estate Settlement Procedures Act or RESPA is a federal law that makes it illegal for anybody to tell your which company to use.