The American Land Title Association has released the results of an industry survey showing that title insurers paid approximately $460 million in claims in 2001, compared with $350 million the previous year.
These payments were made to compensate insured homeowners for losses they experienced under policies issued to them, or to defend their titles from the claims of others.
"The public misperception that title insurers do not pay substantial claims results from a lack of understanding of what title insurance is and how it protects homeowners," said James R. Maher, executive vice president of the association.
Unlike other forms of insurance, title insurance is based on actions that have already occurred, not on what may occur. This is because property can be used for many purposes over a long period and as a result be subjected to numerous claims.
An examination of the public records is the starting point for a professional title search. Problems are generally resolved before the homebuyer closes on the property. Problems arise more frequently than is generally assumed. An association survey of 420 abstracters and agent operations showed that title problems arise in 1 of every 4 real estate transactions.
Because of the research and corrective work that title agents perform, it is rare for homeowners to suffer a loss under their title insurance policy.