A standard title insurance policy will typically cover the following:
- Disputes about ownership, including claims by unknown heirs
- Incomplete or inaccurate information on public records (such as an incorrect name on the title)
- Fraud and forgery, including false signatures on documents
- Currently pending liens, such as mechanics liens
- Encumbrances or judgments
- Unrecorded easements
Comprehensive title insurance policies can cover encroachments and license infringements by previous owners. It is critical to get title insurance because even after real estate companies conduct a title search, homeowners still stand to lose money in diverse scams and mishaps.
Title insurance does not cover disputes over boundary lines, encroachments, mineral rights, or issues with zoning
Title insurance is often confused with property insurance, and although these two policies protect against two almost similar types of risks, they are uniquely different. A title policy does not cover disputes over boundary lines or encroachments – issues covered by a property policy.
For example, sometimes, an old water line might run across your property for another owner's financial benefit. Although you never use the supply, this water line could trigger a loss in value for your property, so it may be best to consult a professional and see if you can get a property insurance policy that covers the same.
Title insurance does not cover the cost of resolving any dispute over a property that was not included in the original policy
For example, if you bought a piece of property and the title insurer did not state that it covers against easements, you would have to bear the loss, even though it was not your fault. You really need to make sure a title insurance policy includes everything in it that you think it probably should. For example, some policies do not include coverage for undeveloped land (especially if there are no improvements on it). In this case, you would need to buy title insurance for each parcel individually.
Title insurance policies exclude coverage for incidents resulting in deterioration of the property after the sale
Most title insurance policies do not cover incidents relating to property damage that occurs after closing, such as pests and mold. Thus, it's essential to get some comprehensive property insurance in place first, as they will be able to cover additional costs related to unforeseen events or issues post-closing that you might not have thought about when deciding on a title policy.
Also, title insurance does not offer protection against imperfect property conditions that result in fire or when a property suffers from any other natural catastrophe. Your homeowner's insurance policy may include fire and storm coverage as a standard benefit or optional coverage.
The insurance generally does not cover any home repairs that the previous owner did not perform
The insurance company will not cover repairs such as leaking roofs or cracks in foundations (which can allow water damage and other hazards to enter your home).
As a general default, title insurance policies do not cover any damage due to underground fuel tanks. Unless the paperwork denotes that there was one present in your home before you purchased it, a title company would not have known about this preexisting structure even if it mentioned the presence of other things like wiring or plumbing within your residence.
Title insurance does not cover restrictive covenants against your home
Some homeowners are unaware that title insurance does not cover restrictive covenants against their homes. Homeowners are encouraged to research their property before buying a home, and if they find restrictive covenants, they will need to get a lawyer's advice.
You have to do a title search. If you don't, you could be in for a big surprise. It's important to know what's on your title if you're buying a home. If you're about to buy a home and want to see it or move into it as soon as possible -- whether it's a short sale or foreclosure – make sure that there are no restrictive covenants against your home before making an offer.
Title insurance does not cover the failure of the buyer to pay their mortgage
This type of insurance does not cover the failure of the buyer to pay their mortgage for any reason, including death, bankruptcy, or divorce. You should check with your lender about any potential costs related to failing to maintain your property, as they may sue you directly rather than suing through the title company. The lender may charge more interest on your loan until such a time as the issue is resolved.?
Title insurance is a protective financial guarantee that protects your home against a claim of title defects. Your title insurance may have significant limitations concerning the issues that are covered. It is essential to review the policy to determine what is covered by the title insurance and what is not.