Learn · Topic 1
Title Insurance Basics
What a title policy actually is, the two kinds you'll see on almost every deal, why the premium is paid once, and who counts as an Insured.
DISCLAIMER: For informational and educational purposes only. Nothing here is legal advice, a title opinion, or a commitment to insure, and no attorney-client relationship is created. No one may rely on this content for any transaction or legal decision. Coverage is governed solely by the terms of an issued policy or commitment, and requirements vary by state and underwriter. Consult your own attorney and underwriter. Views are my own and not those of my employer.
The minute version
What a title policy is
- A contract of indemnity: the insurer pays actual loss from covered title matters, up to the Amount of Insurance, and pays to defend covered claims.
- It looks backward. It insures title as of the Date of Policy, not problems that arise later (with narrow exceptions, like the recording gap).
- The 2021 ALTA policies say it plainly: the policy is not an abstract, a legal opinion, or a report on the condition of title.
Owner's policy vs. loan policy
- Owner's policy: protects the buyer's title (fee, leasehold or easement) in the amount of the purchase price or value.
- Loan policy: protects the lender's mortgage: its validity, enforceability and priority. The amount usually tracks the loan amount.
- A loan policy does not protect the owner. A buyer who skips the owner's policy is uninsured even if the lender is covered.
Who is an Insured
- The party named in Schedule A, plus listed successors: heirs and devisees, successors by merger or conversion, and certain grantees such as wholly owned Affiliates and estate-planning trusts.
- A later buyer is not an Insured. The buyer needs its own owner's policy.
- On a loan policy, later holders of the debt are generally covered as successors to the insured lender.
The commitment comes first
- Before closing, the title company issues a commitment: Schedule A (proposed insured, amount, estate, land) and Schedule B (Part I requirements to satisfy, Part II exceptions the policy won't cover).
- Satisfy the requirements, negotiate the exceptions, close, and the policy issues on those terms.
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