Title insurance is considered to be an essential part of any successful real estate transaction, and most lawyers obtain title insurance as a matter of course. However, title insurance is like any other insurance contract, and what it covers is limited to what is stated in the contract. So how do you know if your title insurance contract will cover you in the event of a title defect?
What Title Insurance Covers
As a general rule, basic title insurance will protect you against any title defect that may arise in the course of your real estate transaction. This includes, but is not limited to:
- Errors in public records
- Disputes over boundary or survey data
- Unpaid mortgages or liens
- Unpaid secured loans using the property as collateral
- Court judgments against the property
- Unrecorded or undisclosed easements and covenants
- Unpaid property taxes
- Falsified or fraudulent documents
- Undisclosed heirs
Title insurance is essential because, no matter how thorough your due diligence is, there is always a risk of unrecorded or unreported problems that are not unearthed until it is too late. Title insurance helps to protect you against liability relating to these sorts of title defects.
What Title Insurance Does Not Cover
However, title insurance only covers problems with a property’s legal title, not issues with the structure of the building or the state of the property itself. This might include the presence of mold, infestations of insects or rodents, damage from a previous fire or flood, or repairs for defective construction from previous owners. These sorts of property issues are outside the scope of title insurance, and it will cover the costs of repairing these problems.
What Happens If You Have an Issue TItle Insurance Does Not Cover
Ideally, you should make sure to have a property inspected as part of the process of purchasing a property. However, if you do find you have one of these issues even after conducting inspections, title insurance will not protect you. This means you will face the full cost of any litigation that may arise, as well as the expenses for repairing problems you find on the property.
The Value of Title Insurance
That being said, title insurance can still protect against many of the legal issues that you may face in the course of purchasing or selling real estate. Without it, you may find yourself paying thousands of dollars to litigate issues that you did not realize were there until the transaction was complete. This can help to reduce much of the liability you can face, protecting you from the cost and stress that comes with litigating disputes over title.
If you are an attorney assisting a client with a real estate transaction, you should contact the title insurers at Habitat Abstract. Our experienced staff will assist you with obtaining a title insurance policy that protects your clients and prevents unforeseen issues related to a defective title. Contact us at 1-888-99-TITLE (1-888-998-4853) or visit our contact page for more information.
