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What Does Title Insurance NOT Cover?

Updated: Nov 8, 2023

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Buying a title insurance policy is a really big deal when buying a piece of real estate. So, if you are on the search for your new property and are not familiar with what title insurance is, now is probably a good time to get to know more about it. When you buy your home, you will be presented with an opportunity to purchase an owner’s title insurance policy. While it provides you with a layer of protection homeowners want, it doesn’t protect you from everything.

Let’s take a look at what title insurance covers and what title insurance does NOT cover.

Understanding Title Insurance

Title insurance is offered by your title company after a title search is performed. Anything that is attached to the property’s title when it is transferred to the new owner now becomes their responsibility. For instance, if the prior owner had thousands of dollars in unpaid real estate taxes that didn’t get paid before or at closing - the new owner will now be responsible for paying them or reap the consequences.

Who Buys Title Insurance?

There are two main purchasers of title insurance in any real estate transaction - the new owner may purchase an owner’s policy and the mortgage lender will require a lender’s policy.

An owner’s policy offers protection for the new owner. The decision about whether or not to purchase an owner’s policy is often optional. However, it is always highly recommended. Owner’s policies protect the owner from damage due to insured harm up to the purchase amount of the property for as long as the owner - or their heirs - has an interest in it.

A lender’s title insurance policy protects the lender. In order to protect its interests, lenders routinely make purchasing lender’s title insurance a requirement of the loan. A lender’s policy is for the amount of the mortgage and will be in place until the loan has been paid in full.

Each of these policies will require a one-time premium payment which is made at closing and is part of your closing costs.

What Does Title Insurance Cover?

Title insurance protects homeowners and lenders against many different types of title issues or defects, including covering all the costs associated with fighting claims on the property that may arise in the future.

A few common title issues covered by title insurance are:

  • Outstanding taxes

  • Liens against prior owners

  • Judgments against prior owners

  • Lawsuits

  • Erroneous recordings

  • Forgery and fraud

  • Improper signatures

The title search usually finds these issues before you proceed with the purchase. However, sometimes things slip through or facts are revealed after closing - and that’s where protection from title insurance comes in.

What Does Title Insurance NOT Cover?

It is important to understand that title insurance does have its limits. Remember that title insurance protects the buyer from things that happened in the past that could affect their right to own and use the property. It is not a homeowner’s insurance policy and does not protect against a leaky roof, structural damage to your home from a natural disaster, personal liability injury or accidents to a guest in your home, or any other issue that your homeowner’s policy would cover.

There are a few things that your title policy will likely NOT cover:

  • Title issues or defects that you create after you took ownership

  • Specific taxes or assessments after you take ownership

  • Condemnation of your property

  • Restrictive covenants that limit a property’s use

  • Issues that arise due to illegal activity

  • Claims concerning rights on waterfront property

  • Zoning or building violations

Be sure to ask about an enhanced title insurance policy which may provide more coverage for a few of the items listed above.

Title Insurance at Conestoga Title Insurance Co.

Having title insurance is a vital part of buying a new property. Your title search may be free and clear, but you never know what may arise a few days - or a few years - after you take title. Don’t risk it.

Learn more about title insurance at Conestoga Title Insurance Co.

Contact us today at (800) 732-3555.

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