Updated on June 16, 2021
Many homeowners are aware of the title insurance policy obtained through the escrow process during the purchase of their home. As we have discussed in a prior post the purpose of title insurance, it is critically important for homeowners to inspect the property’s title and obtain a title insurance policy. Few homeowners understand the importance of reading through their policy and understanding what the information contained within impacts their rights to their property. Understanding the basic parts of a title insurance policy is an important first step:
A title insurance policy is a contract between the policyholder and the title insurer that requires the title insurer to indemnify the policyholder for losses in connection with the policyholder’s title to the property. The insurer not only agrees to pay for losses listed under the policy, but also agrees to pay costs, attorneys’ fees and expenses incurred in the defense of the title it has insured.
Title insurance policies are generally standard in form throughout most states and will contain descriptions regarding coverage, exclusions from coverage, exceptions from coverage, and conditions of coverage. Note that exclusions, exceptions and conditions are all standard parts of a policy and deserve special attention—homeowners should not assume that the policy will cover any type of title dispute under any condition. One may need to review this to understand what happens to a policy when the property has been transferred, the amount of insurance available, or requirements of the claims procedure.
One important item policyholders should take care to find out is whether their title insurance policies purchased decades ago still provides sufficient insurance. The amount of insurance is generally the purchase price of the property or the amount of the mortgage lien. In Southern California, where the value of property has appreciated in a steady and steep pace, a present title claim may be valued significantly higher than the amount covered by the original policy. Policyholders can purchase an additional policy to cover the gap between the coverage amount (based on the original purchase price) and the current value of the property.
As another example, if a owner-policyholder has a reciprocal easement agreement that gives the owner rights in the next door neighbor’s property, the policyholder may want to make sure that the reciprocal easement agreement is not excepted from the policy—or alternatively, that the language in the exception is qualified so that the rights to the adjoining property are covered under the policy.
Schorr Law’s real estate attorneys in Los Angeles have significant experience with title reports and title insurance. For help in Insurance recovery disputes Los Angeles matter, contact us today for a consultation. P: (310) 954-1877 | Text: (323) 487-7533 | E: [email protected] | Or use our Contact Form.
See related: How to Determine Lien Priority on Real Property