How to Understand Your Home Owner’s Title Policy
Purchasing a home is an incredible accomplishment and one that should be celebrated! You’ve worked hard to get to this point, and now you’re reaping the benefits.
While there should be plenty of rejoicing after you’ve found the home of your dreams, it’s also incredibly important that you protect your property rights and understand what is included in your owner’s policy.
This might sound intimidating at first, but these policies are put in place to protect you, so it’s beneficial to know what you’re signing.
An owner’s policy – for a one-time fee paid at closing – will help protect your property rights for as long as you or your heirs own the property.
Here’s what the owner’s title policy will look like and what it all means:
The owner’s policy has five sections: Covered Risks, the Exclusions From Coverage, Schedule A, Schedule B, and the Conditions.
This section details the kinds of risks the policy will help insure against. Some of the most important covered risks include:
- The risk that someone else owns your property
- The risk of a defect or encumbrance on your title caused by fraud
- The risk of any liens for real estate taxes or assessments that have not been paid
- The risk of the right of access to and from your land
Be sure to ask your title agent about the covered risks that are included in your policy, and which are subjected to other exceptions or exclusions.
This portion of the document will list the exclusions that are limited to the coverage of the policy – which are issues that are out of control of the title company. These usually include:
- Governmental regulations on the land and eminent domain
- Title defects known to the insured but not disclosed in writing to the title company prior to the date of the policy
- Effects of bankruptcy law on the transaction
Schedule A is a big deal – it sets forth the specific information in order for your policy to be valid. It will include the date of policy, the amount of insurance, the insured, the legal description of the land insured by the policy and the estate insured.
This form will list the various exceptions to the title that the title company found when it performed the title search. This list shows you (the insured) which items will not be covered by the title policy, and that the title company will not pay a claim or defend against a claim based on this list. This list could include:
- Unreleased mortgages on the property
- Restrictions on the use of the property
- Homestead rights or survey issues (if no survey has been performed)
When you’ve reached this form, you’ve come to the outlines of the relationship between the insured (you) and the title company.
The first section will define certain terms used in the policy, like: “Insured Claimant,” “Entity,” and “Land” to name a few.
The second section will show how a claim under the policy is handled, including how to provide notice of a claim, what is required to prove loss, and the requirement that the insured (you) must cooperate with the title company when handling a claim.
With the right title and escrow company, all of your questions can be easily answered. You shouldn’t feel left in the dark! Call your local AmeriTitle branch with any questions or concerns you may have.
Check out Home Closing 101 for a deeper look at how title works.