If you have recently bought a new home, you are likely seeking to protect your new investment in every way possible. One highly effective way of doing this is by purchasing title insurance. This is a type of indemnity insurance that serves as protection for both homebuyers and lenders against losses associated with issues or “defects” in a property’s title.
Unlike other types of insurance, which are often paid monthly, semi-annually, or yearly, title insurance is paid just once after closing. There are two types of title insurance: an owner’s policy and a lender’s policy. Before discussing what title insurance doesn’t cover, it’s important to know what a standard policy does cover.
What Does Title Insurance Cover?
A standard owner’s title insurance policy generally covers:
- Ownership claims from other parties, including undisclosed heirs
- Flawed public records (such as an error in the homeowner’s name listed on the title or an incomplete or inaccurate description of the property)
- False signatures on documents, including fraud and forgery
- Outstanding liens (e.g. mechanics liens) and lawsuits
- Judgments or encumbrances
- Unrecorded easements and other restrictive covenants that reduce a property’s value
Some extended policies cover claims related to encroachments and previous homeowners’ lack of building permits. Owner’s title insurance exists because even after a real estate company conducts a title search, there is still a risk that a homeowner can sustain financial losses. Who pays for title insurance (the buyer or seller) and the cost of this form of protection typically depends on the state.
What Does Title Insurance Not Cover?
As beneficial as title insurance is, this type of policy doesn’t cover all property-related claims and incidents. Here are some examples of things that are not covered by title insurance:
Title insurance doesn’t typically cover any incidents that lead to the worsening of a property’s condition after the date of closing. This includes an infestation of termites or other similar pests. For this type of coverage, you would likely need to purchase a homeowner’s insurance policy.
Mold or mildew
An owner’s title insurance policy also won’t protect you against the development of mold or mildew on your property, regardless of how much of it begins to form. A homeowner’s insurance policy can shield you against this, however.
Fire or weather damage
As unfortunate as fire and weather-related damages are, a title insurance policy won’t cover these types of incidents. Much like other incidents that result in property damage, fire and weather-related events (e.g. storms) don’t harm a home’s title, which is a document that serves as proof of legal ownership. Depending on your location and the insurer, fire and storm coverage may be either included in your homeowner’s insurance policy or offered as an add-on.
Repairs for issues not caused by previous homeowners
Any home repairs to fix issues such as leaking roofs or cracks in foundation walls (which can often lead to water or debris entering your property) that are not attributable to the previous owner’s work without a permit won’t generally be covered by a title insurance policy.
A title insurance policy also generally won’t cover damage to items such as underground fuel tanks. This is because a title company couldn’t have known about the existence of such an item in your home unless the title specifically mentioned it and the company neglected to show this on the title insurance commitment, which is a business’s promise to issue title insurance for a property upon closing. A title commitment normally lists the same terms and conditions that are delineated in the ensuing title insurance policy. Therefore, it’s always important to review this carefully.
Speak To The Title Insurance Experts
Reach out to the professionals at Mathis Title Company to learn more about what title insurance does and doesn’t cover. We are dedicated to providing both real estate settlement services and legal advice to homeowners, sellers and lenders throughout Northern Virginia. Robin Mathis is an attorney who has performed thousands of closings throughout her career and is highly knowledgeable about both the buyer and seller side of real estate transactions.
During a home sale, we will hold all funds being transferred in an escrow account prior to title transfer and closing. Once the title order is approved, we can begin a title search to make sure the title transfer is clean and a title insurance policy can then be created. We work with several reliable underwriting companies to issue title insurance and offer both basic and extended owner’s policies.
Call Mathis Title Company today at (703)214-4020 or contact us online to learn more about our title insurance policies or to request a consultation.