Title insurance is an insurance policy or contract issued by a title company that protects you—the purchaser or owner—against a loss that may arise due to a defect in your ownership or an interest you have in real property.
Additionally, the title insurance company agrees to defend you in court if there is an attack on your title. Your title company will cover attorney and court expenses, or pay a loss caused by the defect in title up to the face amount of the policy subject to the terms listed in your policy.
The average property owner should be aware of two types of title insurance policies:
Since most property owners take out a mortgage at the time of purchase or during ownership, the lender will likely request title insurance to protect its investment against loss. Lenders know many things can cause loss of title and significant expenses can be incurred when defending a title attack. They insist upon a loan policy of title insurance to protect their stockholders’ and investors’ investment in your property.
An owner’s policy of title insurance protects your equity as the buyer or owner of the property. As the owner, you need assurance that your investment cannot be lost due to a problem or defect in the title.
No. A deed is merely an instrument by which the seller transfers their right of ownership to you. It does not constitute proof that the seller is actually the owner, nor does it eliminate claims or rights others may have in the property. The deed does not stipulate rights, liens, or claims that may be outstanding against your title.
The title policy contains a standard exception to coverage of defects described on a survey of the property (survey matters). A survey amendment greatly reduces the terms of the standard exception, resulting in broader, more inclusive coverage. However, as long as underwriting requirements are met, the survey can be amended to provide coverage against most survey matters, contingent on premium payment and delivery of a survey to the title company. (The cost for a survey amendment to a residential owner’s policy is currently 5 percent of the title policy’s premium, which is based on the purchase price of the land.) A survey can only be performed by a Texas registered professional land surveyor. The title company cannot perform or complete a survey of property.
The title policy contains a standard exception to coverage of defects described on a survey of the property (survey matters). A survey amendment greatly reduces the terms of the standard exception, resulting in broader, more inclusive coverage.However, if underwriting requirements are met, the survey can be amended to provide coverage against most survey matters upon premium payment and delivery of a survey to the title company. (The cost for a survey amendment to a residential owner’s policy is currently 5 percent of the title policy’s premium, which is based on the purchase price of the land.) A survey can only be performed by a Texas registered professional land surveyor. The title company cannot perform or complete a survey of property.
Title insurance protects you, the insured, from loss that may occur from matters or defects from the past. Other types of insurance—such as auto, life, or health—protect you against losses that may occur in the future. Title insurance does not protect against a defect that may originate at a later date.
Numerous defects or problems can cause a loss of the title to your property, some of which may not become known for months or years after the original property purchase. Even the most meticulous title search (examination of public records) may not reveal all defects. Hidden risks can result in a total loss of your investment or significant legal expenses to defend your title. Defects that can lead to loss of title or a lawsuit include:
It could be unpaid property taxes, a misinterpreted will, an incorrect survey, a forged deed, an undisclosed lien or missing heir, legal confusion over similar names, or any of dozens of other mistakes that can occur when a title is transferred. Public records can be wrong; no matter how thoroughly a title is researched, there’s always a risk something wasn’t found.
Used in some parts of the United States, an abstract is a history of the title to a property revealed in public records. It includes deeds, mortgages and other instruments, and legal proceedings that have impacted property over a course of years. It is the responsibility of the owner (and their attorney) to clear any defect revealed in the abstract that might impede a clear title. An owner who cannot clear the defect must accept it as a limitation on their right of ownership. Defects that seriously affect the title are frequently omitted because they are not shown in public records.
It may not, simply because public records from which an abstract is drawn may not reveal everything affecting the title. For example:
After all known defects are eliminated, serious, unrevealed risks may remain.
Title insurance defends you in a lawsuit against your title, and either corrects the title problem or pays the insured’s losses up to the face amount of the policy. After you sell the property, the title policy protects you against defects occurring before you owned it that may cause the purchaser to suffer a loss, if you warranted the title.
The title policy guarantees that—at the date the deed was filed for record, placing title in the name of the insured—the title was free of defects (apart from those “excepted to” in the policy). The policy does not guarantee the amount of land; it guarantees no buildings or other improvements belonging to someone else were located on the insured land when an acceptable survey was furnished to the title company. Amending the standard survey exception incurs an additional premium.
Simply Contact Us at Presidio Title to handle the property’s closing, telling us that you want to purchase an owner’s policy of title insurance.
In Texas, title insurance premiums are regulated by TLTA (Texas Land Title Association). You pay the premium only once. The amount of the premium is based on the purchase price of the property, and your policy amount must be equal to the purchase price.
No. The lender’s policy protects the lender’s interest only as long as the loan is outstanding and only in the amount of the balance of the loan at any given time. The owner’s policy protects you up to the face amount of the policy during your term of ownership and after you have sold the property, if you warranted the property to your subsequent buyer.
After arranging a loan, you pay a premium for the purchase of the loan policy of title insurance based on the amount of the loan. If you want to purchase an owner’s policy at the same time, you pay an additional premium only for the difference that covers your equity in the property, together with a small “simultaneous-issue fee.” You do not pay twice for the two policies.
If you buy an owner’s policy separately, you pay the full premium for the policy. Likewise, if you refinance or borrow additional money at a later time, you can expect to pay additional premiums for the new policies, if required.
Most properties have had a number of different owners over the years. The continuous record of all those transactions is called the “chain of title.” Like any other chain, it is no stronger than its weakest link. Any defect in the title of the previous owner may affect your title.
Some of the more common examples include: