HomeBuyingExceptions To Coverage In Your Title Insurance Policy

Your title insurance policy will list certain exceptions that will be excluded from coverage. This is a standard practice, but you should be aware of which items are exempted and therefore not covered. Owner’s policies usually contain a list of some of the following standard exceptions. These exceptions may include:

  • boundary line disputes
  • easements or claims of easements not shown in the public records
  • taxes or special assessments left off the public record
  • claims of people who turn out to be living in the house ( such as a prior owner’s tenants) if their being there isn’t a matter of public record
  • unrecorded mechanic’s liens
  • mineral and/or water rights

You have the option of paying an additional fee to obtain “extended coverage” for any items you want included in your policy. Your title officer can tell you which endorsements are available. Other exceptions which are generally excluded from coverage include zoning, environmental protection laws, matters arising after the effective date of the policy, and matters created, suffered, or assumed by the insured. Some other exceptions could be subdivision and building codes, and matters known to the insured, but not shown on the public records and not disclosed to the insurer.

Your lender will normally request certain endorsements added to their lender’s title policy. These endorsements will often insure against defects found only by inspection of the property, or by a survey, unrecorded liens and easements, mining claims and water rights, and right of parties in possession of the property. Title policies covering a condominium property will also require special endorsements added to the policy.

Go over your title policy carefully to see what is included and which items are to be excluded from coverage. If you find items of concern, discuss these with your escrow agent or closing attorney. Any changes to the policy of title insurance should be made before the close of escrow. It is possible to remove exceptions by means of special endorsements, but the title company must be aware of any special requests as soon as possible. Keep in mind that title insurance gives you coverage only up to a certain point in time for all events which took place during a previous point in time. A lien that is recorded after title insurance is issued, will not be insured against a claim. Some areas provide for your title company to issue inflation coverage. This is an optional coverage item, is relatively inexpensive and may be worth considering.

Your lender will normally request certain endorsements added to their lender’s title policy. These endorsements will often insure against defects found only by inspection of the property, or by a survey, unrecorded liens and easements, mining claims and water rights, and right of parties in possession of the property. Title policies covering a condominium property will also require special endorsements added to the policy.

TIP
Title insurance will not cover you for unpaid property taxes which are not known at the time of closing. It will also not cover unpaid municipal or IRS liens, or unpaid gas, electric or water bills.

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