An underwriter is the company who acts as the title insurer. They take most of the risk and the financial responsibility on any policies. The agent is the local company comprised of title experts who provide the documentation and closing assistance, if requested. They also issue the policy for the underwriter.
A title commitment is a report issued by a title insurance company or its agent. It consists of a cover jacket and Schedules A, B, C and D. Schedule A states what policies are to be issued, describes the property and shows the record title owner. Schedule B lists certain exceptions such as easements, oil and gas leases, restrictive covenants and future property taxes. On Schedule C requirements are listed which must be satisfied prior to closing. They may sometimes include payoff of liens, requests for marital status and any necessary corrective deeds or other documents. The schedules conclude with Schedule D. It lists information about the underwriter and the agent issuing the commitment.
Customarily, the commitment is sent to the buyer and his or her lender prior to closing.
A title policy is issued upon the finalization of the transaction. It consists of Schedules A and B. The two schedules list the information as referenced on the title commitment and any matters effecting changes to the title at closing.
The title policy itself is a contract between the insured and the underwriter insuring against loss in the event a defect in the title is discovered. The two policies which may be issued are an Owner Policy and a Mortgagee Policy.
The insured in an Owner Policy is the owner as shown on the recorded deed. It insures the owner of the property against defects in the title subject to any exceptions listed in Schedule B.
A Mortgagee Policy insures a lender under a lien, against loss caused by invalid title in the borrower, or loss of priority of the lien subject to any exceptions listed in the policy.
Title insurance can protect the new owner against title defect that may occur from a covered risk. There are a number of problems that can arise and may result in the complete or partial loss of real estate.
Even the most careful search of the public records may not find every title problem. Since some problems are hidden, your title may appear to be perfect when there may actually be a problem waiting to surface.
With owner’s title insurance, a title insurer will defend you against an attack on the title to your property as insured. If this attack is successful, the title insurer will indemnify you against the defined financial loss up to the policy limit.
This list will give you an idea of the types of title problems which may occur.
Deeds by minors.
Inadequate legal descriptions.
Easements established through continued use but not discovered by a survey or in the public record.
Mistakes in recording legal documents.
Mistaken reports furnished from taxing authorities.
Misinterpretation of wills.
Deed of community property recited to be separate property.
Errors in tax records. (For example, listing payment against wrong property account.)
Birth or adoption of children after date of will or surviving children omitted from a will.
Falsification of records.
Deeds to or from defunct corporations.
Marital rights of spouse allegedly, but not legally, divorced.
The main difference is in the payment of premiums. The premium for title insurance is only paid once when the policy goes into effect. With other types of insurance, premiums are paid in various installments until the policy is cancelled.
Another major difference between title insurance and other insurance is that title insurance goes back from the date of the policy. Other insurance begins on the policy date and goes forward.
In addition, most insurance covers tangible items and title insurance covers against loss or damage resulting from defects or failure of title on a particular piece of real property.