Title
Insurance

What title insurance covers

• Forged deeds in the chain of title
• Undisclosed heirs (estate distribution errors)
• Mechanic’s liens filed before closing
• Unpaid property taxes or special assessments
• Unrecorded easements affecting property use
• Survey errors (with ALTA survey endorsement)
• Fraud in chain of title
• Divorce or probate errors affecting title
• Homestead rights not properly waived
• Encroachments revealed at a later survey

Owner’s vs. lender’s policy

• Owner’s policy. One-time premium. Coverage = purchase price. Valid as long as you or your heirs own. Protects owner’s equity.
• Lender’s policy. One-time premium. Coverage = loan amount, decreases with loan balance. New policy required at each refinance.

Lender’s policy protects the lender, not you. If you don’t buy an owner’s policy, a title defect that surfaces years later is entirely your problem. Declining the owner’s policy to save $1–3k is the single worst money-saving decision in real estate — routinely producing $100k+ losses.

Title commitment anatomy

Before closing, the title company issues a commitment:

• Schedule A. Basic info — proposed insured, amount of insurance, property legal description, estate covered.
• Schedule B, Part I — Requirements. Items that must happen for policy to issue: payoff of existing mortgage, recordation of deed, resolution of specific issues.
• Schedule B, Part II — Exceptions. Items NOT covered by the policy: existing recorded liens, easements, restrictive covenants, HOA, survey issues (unless removed via ALTA survey).

Review Schedule B meticulously before closing. Each exception is a gap in coverage. Many exceptions are removable by actions (pay lien, clear mechanics lien, obtain survey). Take action before closing, not after.

ALTA endorsements

• ALTA 9 (Restrictions, Encroachments, Minerals). Comprehensive coverage for restrictive covenants violations, encroachments, mineral rights issues. Most common endorsement for commercial.
• ALTA 14 (Future Advances). HELOCs and construction-loan draws covered as they advance.
• ALTA 22 (Location). Confirms the property at insured address matches legal description.
• ALTA 28 (Easement). Easement-specific coverage.
• ALTA 100 (Restrictions). Future violations of existing restrictions covered.
• ALTA Survey. Requires physical survey; removes survey exception from Schedule B.

Premium structure

• Promulgated states. TX, FL, NM, NY, NJ, PA — rates regulated by state Department of Insurance. Flat or tiered per $1k of coverage.
• Non-promulgated. CA, most others — competitive rates. Shop title companies for best premium.
• Reissue rate. If property had prior title policy within 5–10 years (varies by state), reissue rate discount 40–50% off standard.
• Enhanced vs. standard. Enhanced policy covers broader risks (post-policy forgery, adverse possession, boundary issues). 10–20% premium over standard. Recommended for long-term holds and substantial equity.

Common title defects

• Mechanic’s lien post-closing. Work performed pre-closing not paid; lien filed after closing. Covered by title insurance.
• Unrecorded HOA lien. HOA dues unpaid. HOA files lien post-closing. Covered if prior to policy.
• Tax sale title defects. Prior owner has right of redemption that wasn’t properly extinguished. Covered depending on policy and state.
• Divorce without recorded quitclaim. Ex-spouse never recorded quitclaim. Emerges years later claiming interest. Covered.
• Probate distribution error. Heir wasn’t properly included. Emerges demanding share. Covered.
• Forged signature. Deed in chain has forged grantor signature. Covered.
• Identity fraud. Deed-theft scheme where criminal sold property without owner knowledge. Enhanced policy covers.

Resolution process

If covered defect surfaces: file claim with title insurer. Insurer investigates, defends, settles, or pays policy. You do not pay out-of-pocket beyond deductible. Claims typically resolve within 90–180 days for straightforward defects, 6–24 months for litigated defects.

Common pitfalls

• Declining owner’s policy. Biggest mistake. $1–3k savings turns into $100k+ exposure at discovery.
• Survey exception not removed. Purchase without ALTA survey. Encroachment discovered at next sale. Not covered.
• Wrong coverage amount. Bought for $200k, building appreciated to $400k. If defect found at $400k value, policy only pays $200k.
• Schedule B not reviewed. Closing attorney didn’t explain exceptions. Easement for adjacent well line prevents planned addition. Not covered (was in Schedule B).
• LLC title, personal policy. Title transferred to LLC post-close. LLC is new insured; original owner’s policy may not automatically extend. Endorsement required.
• Wire fraud. Criminal intercepts wire instructions, funds sent to wrong account. Title insurance does NOT cover wire fraud. Verify by phone with title company.
• Wholesale / flip gap. Wholesale closing at A-B price, immediate B-C closing at higher price. Second owner’s policy coverage lower than C-price if not upgraded.