ABA Family Legal Guide

Home Ownership

Property Rights and Restrictions

Safeguarding Property Rights: Title Insurance

What is meant by the term "good title"?

Good title means you legally own your home and have the authority to sell it.

Traditionally, this was determined by a study of the public record to determine the chain of ownership back to the very beginning of the property, as well as any encumbrances, such as liens on the property. This study is called an abstract, and some buyers, especially in rural areas, still rely on an abstract and a lawyer's opinion as to what the abstract shows for evidence of title. But metropolitan mortgage lenders generally prefer title insurance.

The chief problem with the abstract system is its lack of accountability. What happens if the abstract company or the lawyer issuing an opinion on the property fails to uncover a flaw in the title and it costs you, the new owner, a great deal of money? You could sue, but you'd have to prove that someone was negligent. With title insurance, the insurer agrees to pay covered claims whether anyone was negligent or not. Essentially, title insurance provides a thorough search of the public record, just as if you had received an abstract and an opinion, but backed by insurance. The title insurance company also assumes the obligation to defend any actions challenging title to the property.