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Q: Why do I have to pay for the Lender to have Title Insurance and what does it protect?

A: A Loan Policy is required in almost all residential real estate closings where a mortgage is used to finance part of the purchase price. Such a policy is issued in favor of the lender and does not protect the borrower’s title. The lender requires a Loan Policy to protect its mortgage interest in the property. This insurance is paid for at closing, is issued for the amount of the loan, remains in effect for the life of the loan and insures only the mortgage lender. Even though a borrower must pay the premium for the Loan Policy, it does not protect the borrower against any loss. 

Q: What is an Owner’s Title Insurance Policy?

A: Owner’s coverage is issued for the purchase price of the property, requires an additional premium and extends coverage to the property owner for as long as they own the property. An Owner’s Policy insures against title defects that are not covered by an attorney’s opinion or title report. An attorney’s opinion of the quality of the record title may not account for many title defects that could easily be missed even after an extensive search of the county records. Common examples of the protection afforded by title insurance would be protection against mistakes in public records or mistakes in the title search and examination. Also, protection is afforded against forged or unauthorized signatures on deeds or other documents and instruments executed under an expired or fabricated power of attorney. 

Q: Why do I need title insurance?

A: When you buy a home, or any property for that matter, you expect to enjoy certain benefits from ownership. For example, you expect to be able to occupy and use the property as you wish, to be free from debts or obligations not created or agreed to by you, and to be able to freely sell or pledge your property as security for a loan. Title insurance is designed to cover these rights you bargain for.

Example: The Erpenbeck scandals that affected many people in Northern Kentucky and Greater Cincinnati emphasized the benefits of title insurance. Most of the lenders who had loaned money on Erpenbeck homes had purchased, and at times paid for them in the borrowers' closing costs, were covered by lender’s title insurance and incurred no loss. On the other hand, very few of the homeowners had purchased owner’s coverage. Consequently, the protections afforded to the mortgage lenders were not available to them. The few homeowners who had purchased owner’s coverage were certainly glad that they had.  At CTCS we encourage our clients and anyone reading this to buy owner's coverage anytime you buy or take over ownership of real estate in any state. 

Q: Can you provide some examples about the types of claims, or risks, covered by title insurance?

A: Standard coverage will protect you from the following and this is what we here at CTCS recommend to our clients.  You are covered and then some.

• Forgery and impersonation;
• Lack of competency, capacity or legal authority of a party;
• Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner);
• Undisclosed (but recorded) prior mortgage or lien;
• Undisclosed (but recorded) easement or use restriction;
• Erroneous or inadequate legal descriptions;
• Lack of a right of access; and
• Deed not properly recorded.