Explanation of the Document and Instructions for Use of Hyperlinks

This document is designed to be a "clickable" online document that leverages the reasons adults read—to learn answers to questions. After the first section, it is assumed that it will not be something consumers will read through from beginning to end. Instead, it's assumed they will go to the questions to which they want answers and in the order they want the information. Thus, some information is repeated in different sections of the document.

This document is intended to be used in individual states, and as such it is modifiable and there are sections that require state-specific information. Many of the state-specific inserts are simply the name of the state or name of the insurance department. There are two other state-specific inserts of great importance: 1) what is and is not included in the title insurance premium; and 2) whether insurers may compete with different title insurance rates or are required to use the same rates. States are not limited to the suggestions provided in the drafting notes and may modify the document to meet state specific requirements. The drafting notes are intended to call attention to some of the areas where a state may need to make modifications based on known variances that exist in the regulation of title insurance.  

 

Adopted by the Executive (EX) Committee and Plenary August 9, 2017

What Is Title Insurance?

Do I Have to Buy It? Do I Want to Buy It?

When you buy property (land or land with a building such as a home), the seller transfers the title to the property to you. Title to property means legal ownership of the property. Some problems with the title could prevent the seller from transferring the property title to a buyer or prevent a lender from issuing a mortgage loan.

Title insurance helps to make sure the seller can transfer the title to you. It also may help protect you if a problem with the title comes up after you buy or refinance property. Title insurance doesn't guarantee there are no problems with a title. But it does guarantee that there are no problems with the title that would prevent a sale or refinance of the property.

If you borrow money to buy a property or if you refinance your mortgage, you have to buy a loan title policybecause the lender requires it. You pay the premium once for each new loan title policy(also known as a lender's title policy). This loan policy protects the lender. The loan policy stays in force as long as the mortgage loan exists.

You don't have to buy an owner's title policy when you buy a property, but this policy gives you protection above the protection of the loan title policy. You buy (and pay for) an owner's policy once each time you buy a property, and it stays in force—keeps protecting you—for as long as you own the property.

Premium discounts may be available to lower your premium. The most common premium discount is a refinance or reissue discountAsk your title agent or title insurer about discounts. 

In [Input Name of State], [pick one from A and one from B]

A. 1.    Title insurers may charge different premium rates. Shop to find the lowest premium.

A.2      Title insurers are required by the [department of insurance] to charge the same premium for the same loan and owner's policies.

B.1.     The premium you pay for title insurance in [insert state] does not cover title search or examination. You will be charged a separate fee for these services in addition to the premium charged for the title insurance.

B.2.     The premium you pay for title insurance in [insert state] covers title search and examination as well as the title policy. There should not be a separate charge for title search or examination.

While your lender may require you to buy a loan title policy, you always have the right to choose the title agent and title insurance company. If your real estate agent, attorney, lender, home builder or other real estate professional tells you that you're required to use a particular title agent or title insurer, that's not true, and you should report this to [state insurance department] and the U.S.Consumer Financial Protection Bureau.

The [state insurance departmentand the U.S. Consumer Financial Protection Bureau have more information about title insurance. They also will take your complaint if you feel you haven't been treated fairly.

With title insurance, you get a title search, a title commitment and a title insurance policy. In a title search, the title agent or title insurance company searches public records for any problems with the title, such as someone other than the seller having a legal right to the property. 

The title commitment is the insurance company's promise to issue a title insurance policy under certain conditions. The title insurance policy is the title insurance company's promise to try to fix some problems missed during the title search or to pay your lender or you if the title problems can't be fixed. Remember, a title insurance policy doesn't guarantee there are no problems with a title but that there are no problems with the title that would prevent a sale or refinance of the property.

There is more information on each of these topics:

What is title insurance?

Does my homeowners insurance cover title problems?

What is the difference between a clean title and a marketable title?

What is a title search? Why is it important?

What is a title commitment? Why is it important?

What if a title search finds a problem with a title?

Are there title insurance policies that cover title problems that can't be fixed?

What is a title exception?

Can the title agent or title insurer remove title exceptions?

Are there title insurance policies that cover problems that happen after I buy a property or refinance a mortgage? What is an extended coverage title policy? What's an endorsement on a title insurance policy?

What happens if I file a title insurance claim?

Can I sue the title insurer for not paying a claim? What is mandatory arbitration?

What's a loan title insurance policy? What's a lender's title insurance policy? Do I have to buy it? Do I have to buy title insurance if I have a mortgage or refinance a mortgage? Why do I have to buy title insurance?

How does a loan title insurance policy protect me?

What is owner's title insurance? Do I have to buy it?

Why do I need an owner's title policy if I have a loan title policy?

Are there different types of owner's title policies? What are the differences and what do they cost?

What should I watch for when I shop for title insurance? What is an affiliated business arrangement? Why am I getting a notice about an affiliated business arrangement?

Do all title insurance agents and companies charge the same premium?

Are there discounts for title insurance?  

How many times do I have to pay for title insurance?

What does it mean if the title insurance agent also provides settlement (or closing) services?

What does the title insurance premium cover in [State]?

How do I shop for title insurance? Where do I find a title agent or title insurer?

Can I choose the title agent and title insurer for a loan policy, or does the lender choose?

How can I learn about any consumer complaints or regulator actions against a title insurance agent or company for unfair or illegal practices? How can I file a complaint against a title insurance agent or company?

How can I learn more about title insurance?

What if I have a complaint about title insurance?

 

What is title insurance?

When you buy property (land or land with a building such as a home), the seller transfers the title to the property to you. Title to property means legal ownership of the property. Some problems with the title could prevent the seller from transferring the property title to a buyer or prevent a lender from issuing a mortgage loan.

Title insurance helps to make sure the seller can transfer a title to you. It also may help protect you if a problem with the title comes up after you buy or refinance a property. Title insurance doesn't guarantee there are no problems with a title. But it does guarantee that there are no problems with the title that would prevent a sale or refinance of a property.

The title insurance policy is the title insurance company's promise to try to fix some problems missed during the title search or to pay your lender or you if the title problems can't be fixed. 

If you borrow money to buy property or if you refinance your mortgage, you have to buy a loan title policy because the lender requires it. You pay the premium once for each new loan title policy(also known as a lender's title policy). This loan policy protects the lender. The loan policy stays in force as long as the mortgage loan exists.

You don't have to buy an owner's title policy when you buy a property, but this policy gives you protection above the protection of the loan title policy. You buy (and pay for) an owner's policy once each time you buy a property, and it stays in force—keeps protecting you—for as long as you own the property.

Premium discounts may be available to lower your premium. The most common premium discount is a refinance or reissue discountAsk your title agent or title insurer about discounts. 

Does my homeowners insurance cover title problems?

No.

What's the difference between a clean title and a marketable title?

Clean or clear title means ownership of the property with no other legal claims on the property.  Title insurance doesn't guarantee there are no legal claims on the property. Instead, title insurance guarantees a marketable title—one that has no legal claims on the property that would prevent the seller from transferring the property title or a lender from financing (or refinancing) the property. 

What is a title search? Why is it important?

The path to title insurance includes a title search, a title commitment and a title insurance policy. In a title search, the title agent or title insurance company searches public records for any problems with the title, such as someone other than the seller having a legal right to the property. Most title problems found in a search must be fixed before an insurer will issue a title insurance policy. Some things that can create a title problem are:

A title search is important because certain problems with a title would mean a seller couldn't legally transfer the title, and a lender wouldn't lend you money to buy the property. The title search is important to you because you don't want title problems after you buy the property.

DRAFTING NOTE: States in which the title search is not included in the title insurance premium should use the language in the brackets.

In [State], the title search is [not] included in the title insurance premium [and you'll pay a separate fee for the title search.] See "What's included in the title premium?"

What is a title commitment? Why is it important?

Once a title search is finished, you'll get a title commitment. The title commitment is the insurance company's promise to issue a title insurance policy under certain conditions. This document is the insurer's offer to write a policy if you pay the premium. It lists possible problems with the title—problems that title insurance will not cover and that may need to be fixed before the lender will lend you money to buy the property. One such problem is a mechanic's lienAn example of a mechanic's lien would be if the seller didn't pay a contractor who made renovations to the property, and the contractor put a legal hold—a mechanic's lien—on the property until he or she is paid what's owed.

The title commitment also lists problems the title insurance won't cover. For example, if property doesn't have access to a street, the title commitment would show that and that the title insurance policy doesn't cover problems related to this.

You can (and should) review the title commitment before you buy a title insurance policy. A title commitment is important because it tells you what was found in the title search and what a title insurance policy will (and won't) cover.

What if a title search finds a problem with a title?

A title search may find problems with the title that make it impossible for the seller to transfer the title to you or that make a lender unwilling to lend you money to buy the property. A title agent can fix most of these title problems. This is called curing the title or clearing the title.  Often, the title problem is an unpaid bill to a contractor or a government office. The title agent will work with the seller (in a property purchase) or you (in a property refinance) to get the bill paid.  Sometimes a title problem can't be fixed, and the title insurance company won't issue a title policy or will only issue a title policy that doesn't cover that problem. A title exceptionis something a standard title insurance policy doesn't cover. An example is an easement, such as a utility company's right to use your property for specific purposes.

Are there title insurance policies that cover title problems that can't be fixed?

Yes. Extended coverage policies—sometimes called the homeowner's title insurance policy—will cover title problems that can't be fixed before the purchase or refinance. For example, the extended coverage policy will cover some title problems that happen after the policy is issued.

DRAFTING NOTE: Modify the response above if extended coverage policies are not available in your state.

What is a title exception?

title exception is something a standard title insurance policy doesn't cover. Title exceptions are typically for problems not recorded (or documented) in the public records the title agent or insurance company searched. Examples include easements, boundary disputes, and mechanic's liens or taxes owed but not shown in the public record. When you get your title commitment, ask your title agent if there are title exceptions to understand what the policy won't cover.

Can the title agent or title insurer remove title exceptions?

A title search may find problems with the title that make it impossible for the seller to transfer the title to you or that make a lender unwilling to write a mortgage for the property. A title agent can fix most title problems. This is called curing the title or clearing the title. Often, the title problem is an unpaid bill to a contractor or a government office. The title agent will work with the seller (in a property purchase) or you (in a property refinance) to get the bill paid.

Are there title insurance policies that cover problems that happen after I buy or refinance a property? What is an extended coverage title policy? What's an endorsement on a title insurance policy?

All title insurance policies cover problems with a title that happened before you bought or refinanced the property.But there are policies that will cover some problems that happen after you buy or refinance a property. Ask about an extended coveragepolicy. An extended coverage title policy can cover problems a standard title policy doesn't. For example, suppose your local government changes the laws that define how you can use your property (often called permissible uses) after you buy it. An extended coverage policy could cover that problem when most title insurance wouldn't. An extended coverage policy lists the coverages it adds to the standard title insurance policy. 

You also can ask about endorsements. Each endorsementon your title insurance policy adds specific coverage to the standard title insurance policy. An example of an endorsement might be one that would cover you if you learn that your home is actually across the property line and you are forced to remove that portion of the building.

You'll almost always see endorsements on a loan title insurance policy. Ask what they cover, why they were added, how much they add to the cost of the policy and if they're required. You may have no choice but to pay for the endorsements on a loan policy.

DRAFTING NOTE: Modify the response above if extended coverage policies are not available in your state.

What happens if I file a title insurance claim?

Title insurance guarantees there are no problems with the title that would keep you from transferring title or financing (or refinancing) a mortgage. If you have title insurance and a problem with the title comes up after you buy or refinance the property, you can file a claim. After you file a claim, the title insurer will try to fix the problem (if the policy covers the problem). But, title insurers don't guarantee they can fix your title. Sometimes titles can't be fixed. If the title insurer can't fix the problem, it will pay the lender (if you have a mortgage) and/or pay you (if you have an owner's policy) up to the amount of the loss. The claim payment won't be more than the amount of coverage in the policy.

Can I sue the title insurer for not paying a claim? What is mandatory arbitration?

If there's a problem with your title and you file a claim, the title insurance company may not pay your claim. For example, an insurer might not pay a claim because the insurer determines the policy doesn't cover the problem. You may not agree with the title insurance company's decision to deny the claim. You could ask your state insurance department for help. But, if all attempts to get your claim paid fail, you may be able to go to court to enforce your rights under the title insurance policy unless your policy has a mandatory arbitration provision

Some title insurance policies replace your right to go to court to settle a dispute with the title insurer with a requirement to use mandatory binding arbitration. Mandatory binding arbitration means that any dispute must go to arbitration, and the decision of the arbitrator is final. Going to arbitration is very different from going to court. Typically, the insurance company picks the arbitrator, and you can't appeal the ruling of the arbitrator. 

You may reject the mandatory arbitration provision in a title insurance policy, but you may have to pay a higher premium to do that.

DRAFTING NOTE: Modify the response above if mandatory arbitration is not allowed in your state.

What's a loan title insurance policy? What's a lender's title insurance policy? Do I have to buy it? Do I have to buy title insurance if I have a mortgage or refinance a mortgage? Why do I have to buy title insurance?

loan policy (sometimes called a lender's policy) is a title insurance policy that protects the lender's interest in the property. The amount of coverage required is the same as the amount of the mortgage (the amount you borrowed to buy or refinance the property). 

Lenders probably will require you to buy a loan policy when you apply for a mortgage to buy a property or refinance a property you already own.

Even though the lender requires you to buy a loan policy and the policy protects the lender, you pay for the policy. You only pay for the policy once (when you buy it), and the lender is covered until the mortgage is paid. The amount of coverage goes down as you pay down the mortgage.

You have the right to shop for and choose the title agent and title insurer for a loan policy. You don't have to use the title agent or insurer your real estate agent, mortgage lender, builder, attorney or other real estate professional recommends.

How does a loan title insurance policy protect me?

loan title insurance policy protects the lender—not you. But your lender probably won't give you a mortgage to buy the property unless you buy a loan title insurance policy.

What is an owner's title insurance policy? Do I have to buy it? 

An owner's title insurance policy protects you if there's a problem with the title after you buy the property. The coverage is for the full price you paid for the property plus legal costs.

You don't have to buy an owner's title policy, but it can protect you. 

Title insurance policies and coverages vary; ask questions when you shop.

Some important things to know about owner's title insurance:

Why do I need an owner's title policy if I have a loan title policy?

An owner's title insurance policy protects you if there's a problem with the title after you buy the property. The coverage is for the full price you paid for the property plus legal costs.

A loan policy protects the lender, not you. But you probably can't get financing for your property unless you buy a loan title insurance policy.

Are there different types of owner's title policies? What are the differences, and what do they cost?

Yes. There's a standard owner's title policy and an extended coverage owner's policy, often called a homeowner's title policy. The extended coverage owner's policy gives you more protection, including coverage for some problems that happen after the policy is issued. Also, the coverage amounts in an extended coverage owner's policy increase over time with inflation. You can compare the differences at [insert link].

DRAFTING NOTE:  Delete the last sentence of the paragraph above if no comparison tool is available in your state. If a comparison tool is available in your state, insert the link to the tool in the last sentence of the paragraph above.

What should I watch for when I shop for title insurance? What is an affiliated business arrangement? Why am I getting a notice about an affiliated business arrangement?

A real estate agent, lender or other real estate professional may recommend that you use a particular title agent or insurer for title insurance and closing services. Or they may assume that you'll use a particular company without asking you. Both are called a referral

Professionals may make a referral based on good service or lower costs in the past. Or they may make a referral because they have a formal relationship with a title insurance company or agent. If the professional will make money for the referral because of a formal relationship, this is called an "affiliated business arrangement" or "AfBA." In that case, the professional who made the referral is required to tell you about the relationship. The law requires that you should get a separate written notice called a disclosure about the relationship.

Remember that whoever pays for the title insurance is allowed to choose where and from whom to buy the insurance. 

Ask questions if a professional who recommends a particular title agent or title insurer makes statements such as these if you tell them that you want to find your own title insurance agent or company:

"If you choose another title agent, your closing may be delayed."

"Everyone charges the same price."

"We'll give you a discount on [something else] but only if you use our title agent."

If you're told any of these things or you feel pressured to use a specific company or agent, contact the state insurance department [insert state insurance department website link] or the U.S. Consumer Financial Protection Bureau (www.consumerfinance.gov/complaint/).

Do all title insurance agents and companies charge the same premium?

DRAFTING NOTE: Choose Version 1 or Version 2, depending on the situation in your state. Insert the appropriate regulator terminology as needed for [regulator of insurance].

VERSION 1: Yes. In [state], the [regulator of insurance] sets title insurance rates. Every title insurance company will charge you the same premium. But, the title insurer could charge you for other title and closing services (link to below). So you should shop around for title and closing services. 

DRAFTING NOTE: Add the following sentence in states with title insurance premium calculators.

You can check the premium for title insurance by using the title insurance premium calculator at [insert state insurance department website link].

VERSION 2: No. In [state], title insurers can compete on price. So you should shop around to compare title insurance premiums. Be sure to ask what title and closing activities (link to below) the title insurance premium covers and doesn't cover. Shop around for the best price and service. 

DRAFTING NOTE: Add the following sentence in states with title insurance price tools.

Our insurance department has a tool to compare title insurance prices at [insert link to insurance department price tools].

Are there discounts for title insurance? 

Yes. Ask about discounts that might reduce the title insurance premium. For example, you may get a discount if you refinance or sell your property within a few years of a recent title search. Ask your title insurance agent about a reissue or refinance discount.

DRAFTING NOTE: In states where a simultaneous issue discount is available, insert the following after "refinance discount." "Also, if you buy a loan policy and an owner's policy at the same time, expect a discount on one of the policies. Ask how much the discount will be."

How many times do I have to pay for title insurance?

You pay only one premium for the lifetime of a title insurance policy. You pay a premium each time you buy a new loan title policy when you refinance, but only once for an owner's title policy when you buy a property. 

What does it mean if the title insurance agent also provides settlement (or closing) services?

Settlement (or closing) services include preparing documents related to buying/selling or refinancing and arranging for and witnessing when documents are signed.

DRAFTING NOTE: Include the following sentence in states in which settlement (or closing) services are not included in the title insurance premium.

Settlement (or closing) services fees are not included in the title insurance premium.

Some settlement (or closing) services fees are:

Remember, you have the right to shop around for all of these services.

What does the title insurance premium cover in [State]?

The services included in the title insurance premium are different in each state.  The services that a title insurance premium covers in [State] are: 

DRAFTING NOTEStates should complete the list below by adding other services and a description.

DRAFTING NOTEStates should complete the statement below.

In [insert state], a title agent, title insurer, attorney or other professional may charge a separate fee for [insert non-included activities and descriptions]. 

Can I choose the title agent and title insurer, or does the lender choose?

Whoever pays for the insurance is allowed to choose where and from whom to buy the insurance. You have that right even for a loan policy that protects the lender.

How do I shop for title insurance? Where do I find a title agent or title insurer?

DRAFTING NOTE: Include (and modify as needed) the following sentence if the state insurance department's website has a list of title agents and/or title insurers on its website and/or information about title insurance: Visit your state insurance department website at [insert state insurance department website link] for [insert customized list of tools and information available on state site].

Can I choose the title agent and title insurer for a loan policy, or does the lender choose?

Yes, you choose. While your lender may require you to buy a loan title policy, you always have the right to choose the title agent and title insurance company. 

How can I learn about any consumer complaints or regulator actions against a title insurance agent or company for unfair or illegal practices? How can I file a complaint against a title insurance agent or company?

DRAFTING NOTE: States that do not post information about complaints and/or enforcement actions and market conduct exams on their departmental website should omit the next sentence(s).

Our state insurance department has information about complaints. Visit our website at [insert state insurance department website link].

You can search our insurance department's website for enforcement actions and market conduct examinations (an insurance department review of the insurance company's compliance with state laws).

You can file a complaint against a title insurer or agent at [insert state insurance department website link].

The U.S. Consumer Financial Protection Bureau (CFPB) accepts consumer complaints. You can search the complaint database for your title insurance agent or insurer at www.consumerfinance.gov/complaintdatabase/.

You'll also find enforcement actions by the CFPB that involve title agents, title insurers and other real estate professionals at www.consumerfinance.gov/policy-compliance/enforcement/actions/.

Some of the settlement agreements taken by the U.S. Department of Housing and Urban Development (HUD) prior to 2011 can be found in its archive at web.archive.org/web/20160426193841/http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/resetagr.

How can I learn more about title insurance?

State insurance departments regulate title agents and insurers, so visit our website at [insert state insurance department website link].

You can learn more about the entire process of buying a home and getting a mortgage from the "Know Before You Owe" tool from the U.S. Consumer Financial Protection Bureau (CFPB) at www.consumerfinance.gov/know-before-you-owe/. You can learn more about title insurance at www.consumerfinance.gov/askcfpb/164/what-is-owners-title-insurance.html.

You also can learn more from title agents, title insurers and their trade associations. The American Land Title Association (ALTA) has information for consumers at www.alta.org/consumer/index.cfm. ATLA may have a list of title insurance agents and insurers near you. Remember, ALTA isn't a government agency.

What if I have a complaint about title insurance?

If you believe you've been treated unfairly, contact our insurance department at [insert state insurance department website link] to file a complaint.

You also can file a complaint with the U.S. Consumer Financial Protection Bureau (CFPB) at www.consumerfinance.gov/complaint/ .