What’s more, claims approaches are dependent on the region of the country and the local legal and claims environment. Each successive product requires a significantly increased effort to market, underwrite and administer claims. The production costs necessary to generate each of these products also vary significantly. Unskilled and part-time personnel can satisfy the need for an increase in title messengers or clerks, but they typically cannot fill the roles of more highly skilled positions, such as title searchers and underwriters. Another measure of improvement or deterioration in the housing market is the supply of existing houses available for sale and the number of months it would take to clear this inventory at the current sales pace.
If you’re comfortable trusting that no claims will come against your property, a standard policy could be the right bet; but if you want to make sure that your property has protection for as long as you own it, maybe opt for something extra. In some cases, the seller may even pay for enhanced title insurance to ensure the title is protected and clear before selling. Title insurance is a policy that covers third-party claims on a property that don’t show up in the initial title search and arise after a real estate closing. A third party is someone other than the property’s owner, such as a construction company that didn’t get paid for its work on the home under a previous owner.
However, the only fees collected are the one-time charges when the policy is issued. Thus, losses reported in any one year will affect that year’s profitability for statutory accounting purposes but are not, in the main, generated by that year’s business activity. By the does buyer or seller pay for title insurance nature of the business, most title losses are reported and paid within the first five to seven years after policy issuance. Important differences exist between title insurers and traditional property/casualty companies in their abilities to generate investment income.
Deletion provides coverage against claims by tenants, squatters or other parties in physical possession of the property. We’re the Consumer Financial Protection Bureau , a U.S. government agency that makes sure banks, lenders, and other financial companies cost of title insurance treat you fairly. Unpatented mining claims, reservations, or exceptions in patents, and water rights. Amy L. Harman is a partner with the firm’s Real Estate Strategies, Lender Representation, and Title Insurance and Title Resolution Practice Groups.
A title company examines title but does so primarily for its own information and benefit in order to determine whether or not it will issue a title policy, not for the benefit of the buyer or lender to be insured by the policy. It is part of the insurer’s own due diligence undertaken to minimize risk. Does the title company have a duty to at least point out issues that affect title? Again, no. “A title insurance company is not a title abstractor and owes no duty to examine a title or point out any outstanding encumbrances.” IQ Holdings, Inc. v. Stewart Title Guaranty Company, 451 S.W.3d 861 (Tex.App.—Houston [1st Dist.] 2014, no pet.). A title company will produce a title commitment for a pending transaction, listing conditions that must be cured before a policy will be issued; but, if you think carefully about it, this is not the same as counseling either the buyer or the lender. The CLTA policy insures the property owner and the ALTA is an extended coverage policy that insures the lender against possible unrecorded risks excluded in the CLTA policy.
Why Do You Need Title Insurance?
If the lien of the insured mortgage is unenforceable because the insured does not comply with “doing business” laws in the state of the insured property. Our team not only recognizes that these defects exist but are pro-active in providing expedient solutions to resolving these problems in order to bring the transaction to closing. Contact us today if you believe you have a title issue in need of correcting. Taxes or assessments which are not shown as existing liens in the public records. Rights or claims of parties in possession – such as a current tenant with an existing unexpired lease, or any easements, claims of easements, or encumbrances not shown in public records.
- Title insurance protects buyers of real estate against financial loss due to defects in the title of the subject property.
- Title Insurance protects the homeowner and lender, if there is one, against loss.
- You try to refinance or sell your house and find out that your seller’s loan is still recorded against your property.
- Standard Exceptions are called out in a title insurance policy as a matter of clarification.
Endorsement charges for two to three endorsements, on average, apply depending on mortgage requirements. The Amount of Coverage that will apply is typically based on loan amount, but may vary in certain circumstances. Rates shown are the company’s filed Risk Rate Loan Policy rates and other common charges.
How Much Does Title Insurance Cost?
The cost of title endorsements varies from state to state but will be the same from any lender; in other words, you don’t need to shop around for these. Although many endorsements aren’t necessarily very expensive, policy holders still need to consider whether the cost of the endorsement justifies the benefit, says Whitman. You can usually shop for your title insurance provider separately from your mortgage. If you choose to buy owner’s title insurance, the total cost will usually be lower if you use the same provider for both the lender’s policy and the owner’s policy, compared to buying them separately.
Note that the second item on Schedule B excepts (i.e., declares that the title policy will not cover) discrepancies, conflicts, or shortages in area or boundary lines, or any encroachments or protrusions, or any overlapping of improvements. On the TREC contract, the buyer may amend the commitment and delete this “survey exception”—except for the part that refers to “shortages in area,” which will remain regardless of whether the survey exception is deleted or not. Because title companies insure title, specifically the chain of title, not surveys. It also lists what is lender title insurance the proposed amount of the policy that will be issued at closing and name of the prospective new owner (who will also be the insured under the owner’s policy). The title company maintains a database of real estate resources that can be searched in order to produce a “title commitment,” which is a review of the status of title and an important part of the pre-closing process. Because “a purchaser is bound by every recital, reference and reservation contained in or fairly disclosed by any instrument which forms an essential link in the chain of title.
Lakeside Title Company is more than a title provider, we are a true partner. Coverage in the event you’re required to move an existing structure on the property due to a previous owner’s failure to obtain a permit. Zoning coverage which ensures that you’re in the proper zone for a 1-4 family residential property.
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Any law, ordinance, governmental regulation or police power relating to building, zoning, occupancy, use or environmental protection except to the extent that a notice of defect has been recorded. Created or attached after the policy date (with the exception of mechanic’s lien insurance offered elsewhere in the policy. Any law, ordinance or governmental regulation or police power relating to building, zoning, occupancy, use or environmental protection except to the extent that a notice of defect has been recorded.
Owner Title Insurance:
The scope of coverage, however, can differ greatly depending on the type of policy the insured purchases. For more information on purchasing title insurance and other legal and practical tasks involved in buying a house, see Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray, Ann O’Connell, and Marcia Stewart . If you ever end up in a situation where you might have to make a title insurance claim, consider consulting with a local real estate attorney to go over your options. No preliminary title search , no matter how complete, can predict when a long-lost relative or heir will turn up or whether paperwork buried for years under a misspelled name will reveal a claim concerning the property.
Title insurance policies are intended to cover a policyholder as long as he or she owns the covered real estate, but there may be conditions applied to the coverage. Companies can cancel or nonrenewal coverage, but only according to the conditions that are spelled out within the policy. You should read your policy carefully to determine the conditions for cancellation and nonrenewal. Title insurance is a legal agreement issued by an insurer that protects the policyholder from losses resulting from various types of defects that may exist in the specifically described property. For these reasons, CLTA policies are not offered in all local jurisdictions and are not often utilized in commercial real estate transactions.
Claims for the long-tail casualty business lines might take decades to appear and the accruing premiums can add significantly to a company’s assets. As a property/casualty company’s ratio of written premiums to surplus increases, the fraction of total assets that are financed by advanced premiums from policyholders also increases. In other words, writing property/casualty insurance can create financial leverage. Title insurance Exclusions are risks lying outside the scope of insurance coverage unrelated to the specificities of the parcel. Exclusions are called out in a title insurance policy as a matter of clarification. Exclusions are not strictly speaking matters of title, but matters related to use of the parcel, use being a different matter than title to the property.
In a typical sale/development of an office building, both buyers and sellers generally are knowledgeable and sophisticated and retain lawyers to represent their competing interests. Generally, both title insurers and lenders assign senior underwriters to manage and underwrite commercial transactions. This more intensive underwriting process – undertaken by both the buyer and the seller – results in fewer mistakes and title defects and, consequently, reduces the risk of loss.
But not everyone knows what title endorsement is or why it’s wanted or needed. Depending on the state where you are buying your home, your title insurance company may give you an itemized list of fees at closing, which may be different than what is shown on your Loan Estimate or Closing Disclosure. All insurance policies are legal contracts between you and an insurance company. You pay a premium to the company in exchange for the insurance company’s promise to pay for your covered losses. There is an expectation of good faith, i.e., that you and the insurance company will be fair and honest in your dealings with one another. Very few people in the industry realize that like other insurance products, the title insurance industry has insurance products that offer different coverage.
For example, when many records were destroyed in San Francisco’s 1906 earthquake, out-of-town title companies maintained records that allowed landowners to prove ownership of their property. Escrow refers to the process in which the funds of a transaction are held by a third party, often the title company or an attorney in the case of real estate, pending the fulfillment of the transaction. You can get an estimate of what title insurance costs in your area using Old Republic’s rate calculator and Fidelity National’s rate calculator. You also can get a quick quote from First American Title’s fee calculator or Stewart’s rate calculator. You may be able to get estimates for other closing services at the same time.
The title search also checks for secured debts that should be paid off before the sale can happen. Title insurance is primarily based on records which include recorded documents, public records, files and the like. One of the most common of these documents is a deed — a written instrument transferring the title or an interest in real property from one party to another.
A lender will need to obtain an ALTA Extended policy in order to remove the mechanic’s lien exception, and title will often require a variety of documentation and an affidavit from the borrower in order to provide this coverage. Even the best title search and examination cannot protect your equity and home from matters not appearing in the public record. Insurance against loss due to an unknown defect in a title or interest in real estate. In other words, title insurance covers past title problems that come up after you buy or refinance a property. Finding the right home to call your own can bring unparalleled satisfaction and joy.
This compensation may impact how, where and in what order products appear. Bankrate.com does not include all companies or all available products. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters.
If the license is inactive due to non-compliance with continuing education, you cannot write business until the requirements are filed and the license is reactivated. The one hour is not in addition to your regular continuing education requirements, but one hour of the six hours must be an approved ethics course. The year should be considered from one birthday to the next, not a calendar year of Jan. 1 to Dec. 31.
For more information, see our article, Title Insurance Special Exceptions. Working with Counselors Title’s best-in -class insurance providers our clients are able to minimize this necessary insurance cost and select the right kind of policy for them. And, with our best practice approach to reissue discounts, our clients are also able to save additional money when reissue discounts are available. It’s suggested to have an owner’s policy as well, since the lender’s policy doesn’t cover you from claims on your title. Your mortgage lender’s policy will remain in effect as long as you are paying your mortgage; the costs for it will be rolled into closing costs.
Standard exceptions listed in the commitment can also be removed before the actual title insurance policy is issued thereby expanding the coverage provided by the title insurance. This is most often done through the use of acceptable affidavits establishing that the conditions outlined in the exceptions do not exist or have been remedied. Title insurer means any company issuing title policies as insurer, guarantor or indemnitor. A title insurer must have a certificate of authority from the CDI to issue title insurance policies in California. The home buyer should insure the full purchase price of the property; the lender only requires title insurance to cover the amount of your loan. You’ve saved a lot of money and potentially taken out a large mortgage to buy your dream home.
However, some off-record items are covered under its provisions, including forgery and fraud. The endorsements included, if any, as part of the policy will affect coverage. First, a title company will perform a title search to make sure the property you want to purchase has a clear title.
Use the chart below as a guide to determine which activities require a license. The CoverageOne can be issued on 1-4 Family Residences, including condos. The policy CANNOT be issued on unimproved land, multiple condos or improved units which contain more than 4 dwelling units. This policy coverage has certain deductibles, liability limitations, exceptions and exclusions.
In an insurance contract dispute, the initial burden falls on the insured to establish coverage under the terms of the policy. Co., 130 S.W.3d 181, 188 (Tex.App.—Houston [14th Dist.] 2003, pet. denied). The insured must give the title company prompt notice and cooperate in furtherance of the claim. The old requirement that the policy itself be produced in order to recover has been eliminated.
Texas is a community property state and, as such, all property acquired by either spouse during marriage is presumed to be a community asset. It is common for a title company to either require joinder of a seller’s spouse on a deed or, in the alternative, a marital status affidavit and a non-homestead affidavit. Every title insurance agent must complete six CE hours per year, including one hour of ethics. To qualify to sit for the exam based on experience, you must have two thousand hours of prior title work experience. Prior title work experience includes work such as searching, examination, issuing commitments, preparing a policy for issuance, etc.
Owner’s title insurance, often purchased by the seller to protect the buyer against defects in the title, is optional. While real estate professionals may suggest a title insurance company, owners can choose their provider. Title claims can arise years after a policy is written, and a key consideration in selecting a title insurer is the company’s financial stability. Investors Title Insurance Company consistently achieves the highest financial stability ratings in the industry. We maintain this financial stability through sound financial practices and have a proven track record of withstanding volatile market cycles, always maintaining our ability to pay claims.
It can also provide a cash settlement to a new owner who unwittingly purchases a property with a forged deed from a fraudulent seller who did not actually own the home. Further, owner’s title insurance protects your ability to sell the home one day if a problem turns up during a later title search. The title policy provides an avenue of recourse and recovery in the event either lender or buyer sustains a monetary loss as a result of a title defect.
Even the current owner might not be aware that someone else has a claim on the property. In the case of an overlooked heir, even the person who has those rights might not know they have them. The title company acts as a clearinghouse for closing documents that need to be signed and recorded, as well as for funds to be collected and disbursed at closing.
An enhanced title policy will increase in value along with your home. Enhanced title policies protect against common and uncommon property and ownership disputes. In short, it doesn’t protect against issues newly created after you buy the property. It protects against issues that might have affected your decision to purchase the property had you known about them at the time.
Because a standard title insurance policy serves only to protect against some potential losses and damages caused by problems relating to the ownership of the property, you should have and a lender will require you to secure additional coverage. Your title insurance agent will provide such coverage by issuing endorsements to your title insurance policy. If a title claim is valid, the buyer risks expenses and actual loss, up to and including loss of the entire property and all equity in it . If the claim turns out not to be valid, the buyer still has to pay out of pocket to defend the claim or to rid the property of a cloud on its title. On the other hand, buyers who purchase owner’s title insurance have a title insurance company behind them that has the obligation, whenever coverage exists, to pay the costs and fees incurred to defend the property owner and to pay losses that ultimately occur as well.
Beyond this fiduciary duty, the title company’s only obligation is to honor the terms of its policy and indemnify the insured against covered losses. Also, it is advantageous, in terms of time and expense, to have an attorney on your side in the event a legal issue arises when title is examined or if an issue arises at the closing of your transaction. But, as to any recorded claims of ownership about which you and the Seller are unaware, and which exist but were not discovered by your title insurance agent prior to the issuance of your policy, you are protected.
Policy language has changed over time, so it is recommended you read the continuation of coverage provisions in your policy carefully to determine coverage terms. The term of a title policy generally ends upon the sale, transfer or refinancing of the underlying property, which means that title insurers are unable to determine which and how many of its policies still are in force. This situation arises because the title insurer is not advised of the new policy, unless that insurer is fortunate enough to have written both the new and the old coverage. This feature provides for significant differences in the nature of claims and the reporting of financial information between the property/casualty business and that of the title insurer. Secondly, more profitable and complex than refinance orders is the residential purchase business. And lastly, underwriting commercial transactions represent the highest profit margin for title insurers.
Attorneys currently licensed as title insurance agents need only meet the title agent renewal requirements, including residency requirements, to maintain a title agent’s license. In many cases here in Santa Fe, the market demands these coverages, and they have become part of typical contract writing. Buyers should first check to see if the purchase agreement obligates the seller to pay for these exceptions to be removed, in which case the buyer has an easier time of completing the form. Scheduled to go into effect October 3, 2015, the new Closing Disclosure (which replaces the HUD-1) has the many fees that the borrower pays as separate line items. There is nothing is wrong with that – as a consumer you want to know what you are pay for and why.
An index of 100 means a typical family has just enough income to afford a median-priced house. This figure has continued to show steady improvement since 2006 when the housing boom effectively ended, and is now at its highest level in several decades. However, the ability to buy is not the same as the facility to buy, as many borrowers are unable to qualify for mortgages due to tighter credit market conditions. Special Exceptions are found in Schedule B of the 2006 ALTA Owner’s Policy, most times in Section II, and often are referred to colloquially as Section B II exceptions. The Special Exceptions section lists public-record documents representing uninsured risks to title. The Special Exceptions represent the greatest risks when buying or selling property because they can be so diverse, unexpected, contrary to expectations, and ultimately expensive when not accounted for.
Hence, this kind of financial leverage does not burden the property/casualty insurer with additional fixed charges and, as long as rates are adequate, it provides all the conventional benefits of leverage without much of the downside risk. Title insurance involves the acceptance of past transactional events rather than future occurrence events associated with all other property and catastrophe exposures. Title insurance covers you as the homeowner, and your mortgage lender, from title defects such as liens or unpaid back taxes. Title insurance is a term you may come across when purchasing a house, but you may not be familiar with exactly what a title insurance policy is and what it covers. This article addresses both of those aspects of title insurance, in addition to explaining how it works, and whether or not you need it. However, while real estate agents and lenders can answer many questions, often they do not have a great depth of knowledge relating to title insurance, says Klein.
Title insurance for mortgage lenders title insurance is called a Loan Policy. The Loan Policy is usually based on the dollar amount of the loan and it protects the lender’s interests in the property should a problem with the title arise. The policy amount decreases each year and eventually disappears as the loan is paid off. In the United States, the American Land Title Association is a national non-profit trade association representing the interests of nearly 4,500 title insurance companies, title agents, independent abstracters, title searchers and attorneys across the United States. ALTA members conduct title searches, examinations, closings, and issue title insurance that protects real property owners and mortgage lenders against losses from defects in titles. Just as lenders require fire insurance and other types of insurance coverage to protect their investment, nearly all institutional lenders also require title insurance to protect their interest in the collateral of loans secured by real estate.
Can someone sell your house without your knowledge?
It is not legal to sell someone’s property because you claim he/she owes you money – but you don’t have any legitimate claim to that property. Anyone who sells someone else’s property without the owner’s consent and without legal authority can be charged with theft, depending on how they acquired the property.
You may choose any title company you want; you don’t have to use a company selected by a real estate agent, builder, or lender. The premium discount varies, based on the number of years since the original purchase. If the original purchase occurred within two years from the date of the loan policy, you get a 40% discount. If the purchase occurred within seven years of the loan policy, you get a 15% discount. Title insurance companies file annual financial statements with their respective state insurance regulators in accordance with statutory accounting principles. Statutory accounting principles are more conservative than generally accepted accounting principles because assets and liabilities are valued on a liquidation basis versus a GAAP going-concern basis.
Your lender wants to ensure a legal title exists, too, so the property is worth as much as the bank appraised it for. That way, the bank can recover its money if it has to foreclose on the loan. A lender’s title policy protects the lender’s interest up to the amount of the loan.
It does not insure against fire, flood, theft, or any other type of property damage or loss. It protects against losses from ownership problems that arose before you bought the property, but were not known at the time you bought the property. It does not guarantee you will be able to sell your property, or borrow money on it.
To compare, the industry reported nearly $17 billion in title insurance premiums in 2005, but volume fell to $9.6 billion in 2009. Title insurance policies are fairly uniform, and backed by statutory reserves, which is especially important in large commercial real estate transactions where the buyer and their lender have a large amount of money at stake. The insurer also pays for the defense of its insured in legal contests.
At Linear Title & Escrow, we are dedicated to helping you determine the best type of policy for your needs. Our team wants you to understand your options, and takes the time to explain the similarities and differences in policies so that you can make the right decision when it comes to protecting your real estate investment. Though both protect the homeowner against title problems in some regard, reviewing the benefits of Enhanced vs. Standard Owner’s polices really is an apples-to-oranges comparison. An Enhanced policy offers greater protection over a number of title defect categories, when compared with a Standard plan. To make the best decision in your own situation, it’s important to understand how these policies are similar, and how they differ. Two Rivers Title is a multi-state title and escrow company that focuses on providing its clients and customers with the highest levels of communication, expert title solutions and creative closing options.
Are title company fees negotiable?
While most states regulate the premiums for title insurance, the fees are not regulated and are often negotiable. … It’s worth it to ask the seller if they will pay for your title insurance. Sometimes they will and in that case, it’s much better than having to negotiate the fees.
Standard policies do not cover encroachments such as a neighbor’s fence or structure over a property line. Enhanced policies provide coverage for such encroachments, and also cover adverse possession which occurs when an encroachment exists for a period of uninterrupted years as defined in state law. Title Insurance policy premiums are paid in full at issuance and no further premiums are required. The policy is in force as long as the insured has a legal interest in the property. Overall, you’ll want a reputable, stable company that you can expect to be around decades from the time you buy your home.
This policy provides coverage if a homeowner’s existing house is damaged during the exercising of water or mineral rights. Protection is afforded homeowner’s from unforeseen real estate taxes not previously assessed. The Extended Coverage policy also adds value protection by increasing the coverage as the value of the house increases. The policy amount automatically increases by 10 percent a year for five years up to 150 percent of the original policy limit. This policy has been adopted by the Alabama Land Title Association and certain limitations and exclusions that apply. The title insurance activities of search and examination generally are carried out locally, because the public records to be searched are usually only available locally.
A list of title insurers licensed in New York and links to their web sites can be found atLicensed Title Insurers. Community property, survivorship, or homestead rights, if any, of any spouse of the insured . Deletion of this exception provides coverage against encroachments, overlaps conflicts in boundary lines shortages in area or other matters disclosed by an accurate survey.
The Company may also provide various types of property reports when no policies are to be issued and no Closing is to occur. The owner’s policy protects you against losses from ownership problems that arose before you bought the property, but were not known at the time you bought the property. For example, you could lose title to your property due to fraud, errors or omissions in previous deeds, or forgery of a previous deed. The owner’s policy protects the buyer from the covered risks listed in the policy. The one-time title insurance premium is part of the closing costs for the loan, and like most insurance premiums, the cost is based upon the coverage amount.
If the title were later deemed invalid or found to be fraudulent, the buyer lost his investment. Purchasers and lenders need title insurance in order to be insured against various possible title defects. The buyer, seller and lender all benefit from issuance of title insurance.
Members of the land title assurance industry are instrumental in helping to deliver and guarantee this assurance. Your lender might require you to buy a lender title insurance policy equal to the amount of your loan. It protects your lender up to the amount of their loan, but it doesn’t protect your interest in the property. It will protect the lender from any issues that have come up since you bought the property, such as liens or easements.
That means that you will also be covered after you sell the property and convey the title by warranty deed to the new owners. Should the subsequent owners later make a claim against you for some problem that would be within the coverage of your policy, the company will provide the protections listed in Paragraph 5, above. Say you buy a property from a deceased person’s estate, and an unknown heir later makes a claim that they own the property and that it was improperly sold to you. The title search process would have likely turned up evidence of the heir before the transaction closed, but if not, title insurance would help cover costs related to settling the heir’s claim.
In the past, lenders had provided potential borrowers with Good Faith Estimates . In a recording system, an independent authority reviews government land transfers. In a registration system government can decide registration disputes in its favor, preventing separation of powers and the constitutional right to due process of law. In a registration system, the cost and risk are borne by the general public, but in a recording system, cost and risk are borne by the users of the system. The Owner’s Policy insures the new owner/home buyer, and a lender’s policy insures the priority of the lender’s security interest.
This disclosure informs homebuyers they are not required to use the affiliate and are free to shop for other providers. The final arbiters of title matters are the courts, which make decisions in suits brought by disagreeing parties. Historically, the person who wanted to understand the title would hire an abstractor to write a property abstract showing the chain of title. However, if the abstractor makes an error, the client may only be compensated if the attorney is negligent, subject to the limit of his financial responsibility . However, the willingness of these professionals to accept strict liability varies.
The bulk of title insurance claims occurs shortly after closing and represents low-dollar costs. In these instances, the title company or its agent amends or corrects the title documentation and makes any required re-filings and notifications. The policyholder might not be made aware of these technical corrections and does not receive any cash payment. Typically, the title company uses a staff underwriter or counsel to correct the problem, and the loss cost is relatively small. The financial strength and surplus of title companies, however, might be more critical than that of property/casualty underwriters.
References are to the ALTA 2006 form of endorsement, but state forms may be used in states in which standard ALTA forms of coverage are, by law or regulation, not used, provided that those endorsements do not materially impair protection to Fannie Mae. As an alternative to endorsements, the requisite protections may be incorporated into the policy. For loans originated prior to January 1, 2008, endorsement forms that meet Fannie Mae’s requirements at the time of origination are acceptable. The title insurance policy must ensure that the title is generally acceptable and that the mortgage constitutes a lien of the required priority on a fee simple or leasehold estate in the property. You’re generally not required to work with the title company your lender or real estate agent recommends, so shop around. You may find that your lender’s affiliate has the best coverage or lowest cost, or another company has a better offer.
Ultimately, the choice of which title insurance company to select is yours. You may want to contact more than one title insurer or underwritten title company to compare costs and services. You can visit our website at for a list of California Department of Insurance licensed title insurers and underwritten title companies. Since title searches are not infallible and the owner remains at risk of financial loss, there is a need for additional protection in the form of an owner’s title insurance policy.
What is the difference between standard and enhanced title insurance?
For example, a “standard” policy covers the homeowner for matters affecting title up to and including the date of the recordation of the Deed, while its “enhanced” policy provides coverage for 28 additional risks, many of them pertaining to future coverage and automatic increases of coverage to cover increases in the …
The loss-tail leverage constitutes only a small percentage of the premiums, however. Title companies collect premiums after the largest component of their costs – operating expenses – has been incurred. Title companies’ expense ratio typically averages more than 90, while the property/casualty industry’s expense ratio is less than 30. The title industry’s higher expense ratio results in a significant reduction in available cash flow for companies to invest. Although the remainder of the title premium is available for investment, the relative percentage of premium collected and invested is significantly less than that of the property/casualty industry. These property/casualty reserves are debt, in that if a policy is canceled, the reserves are owed to the former policyholder, yet they bear no rate of interest.
As long as you complete your continuing education and renew on time, you can hold an insurance license; however, you must be appointed by an insurer in order to write any business. Standard policies do not increase their coverage amount as the property increases in value. The enhanced policy will increase coverage by 10% per year for 5 years up to 150% of the original policy limit. A reissued Schedule A that updates the policy reflecting ownership changes and lien additions or deletions of record. You may want to use a different company than the one the seller worked with, as well, in order to have a new company conduct the title search.
The term “title” refers to someone’s legal ownership of the property. Title insurance protects both lenders and homebuyers against loss or damage occurring from liens, encumbrances, or defects in a property’s title or actual ownership. Common claims filed against a title are back taxes, liens (from mortgage loans, home equity lines of credit , easements), and conflicting wills. Unlike traditional insurance, which protects against future events, title insurance protects against claims for past occurrences. The title company may also add special exceptions that it deems necessary after doing its research. The IQ Holdings case states that a “title insurance company assumes a fiduciary duty to both parties when it acts as an escrow agent in a transaction”—i.e., when it collects and holds money.
“Title” is the collective ownership records of a piece of real estate; it consists of all transfers of real property rights, as well all loans that use the property as collateral. “Title” also means having the right to control and convey a piece of real property. If you choose to have a survey done of your property, you can also choose to purchase an ALTA extended coverage policy, which is usually the most comprehensive coverage available to you. It covers you against any encroachments, limitations to your ability to access the property, and other items that the survey will show.
In most jurisdictions, the ALTA Extended Coverage loan policy is the most common policy offering extended coverage for the lender’s interest only. This means the lender is protected from certain additional “off-record” matters such as encroachments, unrecorded easements, possessory interests, and discrepancies in boundaries – matters that can generally be determined by a land inspection or a proper survey. It insures the lender that they are receiving a lien that will take priority over various interest and claims to the subject property. However, under no circumstances may MERS be named as the insured of a title policy. Because of the risk of loss described above, first mortgage lenders generally require that their borrowers pay for the lender’s Mortgagee Title Insurance Policy.
This will allow time for the insurer and insured to agree on the most comprehensive and affordable extended coverage title policy that can be obtained to minimize the insured’s risk of loss when acquiring property. To address these unknown risks, the insured, when purchasing title insurance, should consider obtaining an extended coverage title policy that minimizes the exceptions from coverage and offers affirmative coverage. Title insurance provides the insured with “peace of mind” in knowing that you are receiving good and marketable title to the real estate purchased. Title Insurance is inexpensive and provides protection against any future challenge to your ownership interests and rights to your property.