Frequently Asked Questions
WHAT IS TITLE INSURANCE?
- Title insurance is simply a contract between the insured and the title company. The insured agrees to pay a premium for the title policy. Should the title to the property or mortgage insured be questioned, the title company agrees to defend the title in court or to make good any loss suffered because of the title being defective. The amount of coverage is up to the face value of the policy, according to the terms of the policy.
- The issuance of title insurance is not merely guess work, nor is it a wager. It is based upon careful examination of the official records of property titles, and the judgmental decisions made by skilled title examiners.
IS THERE ONLY ONE TYPE OF TITLE INSURANCE POLICY?
- No, there are two main types of title policies. Owner title policies, which insure against loss to the owner of the property and mortgage title policies, which insure the holder of a mortgage that his mortgage is a lien (claim) on the property. (Other types of policies are leasehold and easement polices.)
WHAT PROTECTION DO YOU GET FROM AN OWNER TITLE POLICY?
- An owner policy protects the insured owner while he owns the property. It also protects the insured after he sells the property, from any loss he many suffer due to the warranty of title contained in the deed which he signs when his sale is made. The premium is paid only once for this protection. The policy guarantees that at the date the deed was filed of record putting title in the insured, the title was free of defects, except those shown in the policy. It guarantees up to the face value of the property. The policy does not guarantee the actual amount of land, nor does it guarantee that there are no buildings on the property belonging to someone else, unless a survey is furnished to the title company by an acceptable surveyor, an additional premium is paid and the policy so states.
WHO USES MORTGAGEE POLICIES?
- People who lend money. A mortgage title policy guarantees to the insured (the lender) that he has a valid lien on the property. The amount of coverage decreases as the note is paid off. It does not guarantee anything to the property owner and provides him no recourse to the title company should the title prove defective. If the mortgagee policy holder should foreclose, then the policy would be come an owner title policy to him.
IS TITLE INSURANCE JUST LIKE OTHER INSURANCE?
- No, title insurance is unique in that liability under it ends where liability under other forms of insurance begins. Title insurance insures against the results, acts and defects of the past, whereas other types of insurance protect against happenings or losses in the future. For instance:
- A title insurance policy issued today insures the holder against defects of the past, occurring prior to the date of the issuance, that may affect the title. The title policy does not insure against defects originating at a later date.
- Fire insurance, life insurance, accident insurance, etc. protect against happenings in the future.
HOW DOES A TITLE COMPANY FIND OUT IF THE TITLE IS GOOD?
- Before issuing a title policy, a careful search is made of the county, state and federal records that affect real estate. This is accomplished by using the company abstract plant which maintains references to every deed, mortgage, death, divorce, etc. which might affect property. These instruments are examined by attorneys employed by the title company. Based upon the results of examination, the title company decides whether to issue a policy.
CAN ONE GET TITLE INSURANCE ON ANY PROPERTY?
- No, title insurance is not intended for titles known to be bad or defective. A title company would not write a title policy when there is a known serious defect, any more that a life insurance company would write a life insurance policy for an applicant whom a doctor reports to be seriously ill.
CAN A DEFECTIVE TITLE BE CURED?
- Depending upon the severity of the title defects, they can usually be corrected with the assistance of an attorney of the seller's choice. Many times this is done by affidavits, correction deeds and other instruments. In some cases court action may be necessary. Before a title company will issue a policy, the title to the property must be perfected to that company's satisfaction. The title company does not cure bad titles or write legal papers.
WHAT IS THE SENSE OF PAYING A PREMIUM FOR A TITLE POLICY, IF AN ATTORNEY HAS CAREFULLY SEARCHED THE RECORDS AND THE TITLE IS FOUND TO BE GOOD?
- There are many hidden defects which may affect the title to real estate. Some examples are:
03. False Representation
04. Lost Wills
05. Mistakes at Law
06. Mistakes in Description
07. Undisclosed Heirs
08. Clerical Mistakes
09. Illegal Trusts
10. Defective Acknowledgments
- These defects are of such a nature that they may not appear in the records. Therefore, they may not be picked up by even the most thorough search.
CAN YOU AFFORD TITLE INSURANCE?
- The federal government and big business companies require it when they deal in property and loans - you could not afford a loss better than they could. If you are in a position to buy property or lend money - be insured, it's a bargain.
TITLE INSURANCE RATES ARE FIXED BY THE INSURANCE BOARD OF THE STATE OF TEXAS.