WHAT IS TITLE INSURANCE
A “title” is the collective ownership records of a piece of real estate, including the transfer of any property rights and any loans using the property as collateral. A clear line of title makes you much less vulnerable to ownership claims from other parties and to any outstanding debts of previous property owners. Title insurance protects you against losses arising from problems with your property title that were unknown to you when you bought the property.
Before writing a title insurance policy, a title company will check for defects in your title by examining public records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps. The company will then defend in court against claims to the property, subject to certain limitations. If the company loses, it will pay you for covered losses up to the amount of your policy.
Title companies also handle the closing of a property sale and hold any earnest money in a trust account until the purchase is complete.
Title insurance only protects you from claims of ownership. It does not insure against fire, flood, theft, or any other type of property damage or loss.
Loan policies remain in effect until the loan is repaid. Most lenders will require you to buy a new loan title policy if you refinance your home. When the new loan pays off the existing loan, the old loan policy expires. You are entitled to a premium discount on a new loan policy if you refinance within seven years.
Most lending institutions won’t loan you money to buy a house or other property unless you purchase a loan policy. This policy will repay the balance of your mortgage if a claim against your property voids your title. A loan policy covers up to the amount of the principle on your loan.
In Texas, the two most common types of title policies are “loan policy of title insurance,” which protects lenders, and “owner policy of title insurance,” which protects property buyers.
LOAN AND OWNER TITLE POLICIES
The information presented on this page is from the Texas Department of Insurance. For more information regarding title insurance, click here (property owners against the specific kinds of claims listed in the policy. When you buy a house and purchase a mortgagee policy, a title company will automatically issue an owner policy unless you specifically reject it in writing.
An owner policy only covers you up to the value of the property at the time you purchased the policy. It does not cover any increase Owner policiesinsureinvalue, unless you purchase a special “increased value endorsement.”
An owner policy remains in effect as long as you or your heirs own the property or are liable for any title warranties made when you sell the property. You should keep your owner policy, even if you transfer your title or sell the property.
In Texas, title policy forms are standardized. This means the policy language is the same, regardless of the company. It’s important that you read your policy carefully because different companies may describe their coverage exceptions differently. Pay special attention to Schedule B of the policy, which explains any limitations, exclusions, exceptions and special conditions. You may want to discuss these exceptions with an attorney before you close on a real estate deal.
Also, check the policy’s legal description of the land against your survey and your earnest money contract. Title insurance generally does not protect against boundary disputes with neighbors. This coverage is available for purchase for an additional premium.
A title policy does not guarantee that you will be able to sell your property or borrow money on it, or that you won’t lose money if you do sell it.
There are some kinds of insurance that you can buy or pass up. Some you don’t have a choice. One of those is title insurance, which your mortgage lender will require when you buy or refinance a home. The price of a "mortgagee" title policy, which protects the lender, is part of the closing costs on your real estate deal.