What title insurance is
Title insurance is an indemnity contract, bought with a single one-time premium at closing, that protects against loss from title defects that already existed before the policy date. It looks backward, not forward. The classic reversal to reject is the answer describing an annual premium covering defects that arise after the policy date, which gets both the premium structure and the coverage period wrong.
It is not a guarantee that the property will hold its value, and it does not replace the title search and examination. The search is exactly what the insurer relies on in writing the policy's exceptions.
Owner's policy versus loan policy
The loan policy protects only the lender's interest, and that interest declines as the loan balance is paid down. The owner's policy protects the purchaser's equity for as long as the owner holds title.
The trap: the buyer usually pays the premium for the lender's policy, so buyers assume they are covered. Who pays is not who is insured. A buyer with only a loan policy in the file is unprotected. Loan policies do not convert into owner's policies after closing; that conversion does not exist.
Marketable is not insurable
Marketable title is title so free from reasonable doubt that a court of equity would compel a buyer to accept it. Insurable title is merely title an insurer is willing to insure, often with exceptions written into the policy.
- Insurable is the lower standard.
- A title can be insurable and still not marketable.
- The insurer's willingness to insure does not convert a title into marketable title; an exception leaves the underlying defect, and the contract obligation, unaddressed.
Defects that ripen into title
Georgia rule: adverse possession under written evidence of title, called color of title, ripens after 7 years, unless the paper title was forged or fraudulent and the possessor knew it. Possession with no color of title at all takes 20 years. A defective deed is precisely what color of title means, so possession under one can ripen.
Worked example: possession begins in 2019 under a defective deed. 2019 + 7 = 2026. The 20-year period would give 2039, and the 5-year figure belongs to other states.