What is not covered by Title Insurance?

Our clients ask us frequently what is covered and not by title insurance. This is a useful breakdown of title insurance and what it covers in Minnesota.
What is Title Insurance?
It is a good idea, if you plan to purchase a house and have never heard of title insurance before, to familiarize yourself with the concept. Working with a title insurer will give you peace of mind and security in the future. Buying a house is a major financial decision. Let’s break down the basic information about title insurance, and what it protects you from.
Title Insurance Types
Title insurance comes in two types. The first type of title insurance offers legal and monetary protection to the owner, while the second is for lenders. In many cases, to protect all parties involved in a transaction, it is necessary to have both lenders’ and owners’ title policies.
Lenders’ Title Insurance Policy (Loan Policy).
Nearly all lenders require that borrowers purchase lenders’ title coverage, also known as a loan policy. This is to protect the lender’s interests in the property until the loan is repaid or refinanced. The amount is usually determined by the dollar value of your loan, and it decreases with each payment until the loan is fully paid. The title policy is usually issued after the property title search has been completed. While it only covers the lender, the policy does provide some assurance for the buyer. They can also include extended policies.
Owners’ title insurance (Owners policy)
Owner’s title insurance (also called an owner’s insurance policy) is another type of title coverage. The buyer will purchase this type of insurance to protect against future title issues. Owner’s policies usually cover the cost of the purchase price for a once-off fee. They last as long as the owner has an interest in that property. They provide you with assurance that the company that insures your title will assist you financially and defend you if necessary if an unforeseeable or hidden title issue arises. The owner’s title insurance policy can be extended.
What does title insurance cover?
Title insurance is issued to the homeowner after a title search and verification of ownership has been conducted. This insurance protects property owners as well as lenders against losing their property due to title defects, such as lawsuits, unpaid tax, fraud or errors. It also covers the costs for defending future unforeseen claims.
A typical title insurance policy covers:
• Ownership by another Party
• Forgery, fraud and incorrect signatures on title documents
• Recordings that are defective (flawed or inaccurate records)
• Unrecorded easements, for example, are restrictive covenants (terms which reduce the value or enjoyment of a property).
• Liens, liens or other encumbrances on property such as unresolved lawsuits
A property title search should be able to eliminate any issues, and title insurance can act as a safety measure. There are times when past incidents with the property come to light and you’ll be grateful you have title insurance in place. Title insurance is an upfront payment that will protect you and your family for the duration of ownership.
What does title insurance not cover?
There are certain items that will not be covered by a standard title policy. This includes:
• You are responsible for any defects you cause or those that occur after the policy is issued.
• Problems that can arise as a result of not paying your mortgage.
• Problems that arise as a result of not obeying the law or certain covenants.
• Taxes and assessments specific to each state
• Violation of zoning and building ordinances relating to land use, environmental protection, or improvements.
• Restrictive covenants restrict the use of property.
• Condemned Land
• If a body (river or stream, lake etc.) is on your property, you may be liable for claims from other parties who have rights. If a body of water (river, stream, lake, etc.) is located on the property or nearby.
Title Insurance: The risks of not having it
Without title insurance, the parties to a real estate transaction are exposed to a serious risk. One common example would be a buyer of a house who, after the closing, discovers that the previous owner owed property taxes. The burden of paying those taxes is on the new owner if title insurance is not purchased. If they can’t pay, they run the risk of losing their home.
You should always communicate with your title firm about any potential issues to ensure you understand the coverage and limitations of your policy. Cities Title Services, White Bear Lake can answer any questions you may have about the coverage of title insurance.
Call Cities Title Services Today
Cities Title Services is committed to providing the highest level of service within the title insurance sector. Our clients will not find a more attentive service when it comes title insurance services such as property title searches and settlement services. Our experienced team will ensure that you are prepared for a successful and smooth closing. Buying a house is often the largest investment people make during their lifetime. To learn more about the services we offer, contact us today.