Letter from Chuck Bowman: Basics of a title policy explained

Chuck Bowman talks about the basics of a title policy

The owner’s policy has five sections: covered risks, exclusions from coverage, schedule A, schedule B, and conditions.

Covered risks:
Your policy makes it clear that the insurance of the listed risks is subject to exclusions, any exceptions listed in Schedule B, and the conditions.

Some of the most important covered risks are as follows:
1-the risk that someone else owns your property
2-there is some defect or encumbrance on your title caused by fraud or forgery
3-any liens for real estate taxes or assessments that are due
4-that your title is unmarketable, meaning you are unable to sell your property to a purchaser because of a title defect
5-right of access to and from your land

Exclusions limit the coverage of the policy. They deal with issues that are outside the control of the title company, such as governmental regulations on the land and eminent domain and title defects known to the insured but not disclosed in writing to the title company prior to the date of the policy. The policy does not insure against any defect or title issue that is created or attaches to the property after the date of the policy.

Schedule A:
Schedule A sets forth the specific information on the title and policy, such as the date of the policy, the amount of insurance, the insured, the legal description of the land insured, and the estate insured like a fee simple or leasehold.

Schedule B:
Schedule B lists various exceptions to the title that the title company found when it performed the title search. Common things include prior unreleased mortgages on the property, easements, taxes, restrictions on the use of the property, and any other limitations on the title such as homestead rights or survey issues if no survey has been performed. Schedule B exceptions tell the insured that these items are not covered on the policy.

Conditions outline the relationship between the insured and the title company. It defines titles like insured, insured claimant, knowledge, and public records. It describes how to provide a notice of a claim, what is required to prove loss, and the requirement that the insured must cooperate with the title company during the handling of a claim.

-Chuck Bowman, President