title insurance Archives - Teton Realty Blog

Updating your Insurance Policies

September 30, 2021 By Tayson Rockefeller Leave a Comment

One of the tools we use to protect our real estate investments includes insurance policies. The obvious one is your homeowners insurance. With both real estate values and construction costs going crazy, we often overlook the level of protection we have in the event of a catastrophe. If you acquired your home more than a year or two ago, it’s definitely time to revisit this.

Even more overlooked includes title insurance. In fact, many of us don’t even realize that we have a title insurance policy. That’s because title insurance policies are issued once, usually at the time you purchased your property. To reiterate a few of my past articles, title insurance is a form of insurance designed to protect lenders and homeowners from financial loss due to a defect in title. Policies are issued to lenders for the loan amount and owners for the purchase amount. Defects in title can range from errors in the public record to liens on the property and a huge variety of other issues related to your home’s title and its history.

So, if you’ve been issued a policy at the time you purchased your property, why update it? Much like your homeowners insurance policy, we have to establish a value to base the policy. If you are insuring your 800k home for only 400k, you’re only covered up to 400k in the event of an incident. Title insurance works the same way. When a title insurance policy is issued, it’s usually for the original purchase amount. If you purchased your property more than a few years ago, chances are that you’ve seen a significant increase in the value of your property. If a defect is found or if one arises, it’s important to remember that you’re only covered for the original amount of your policy. This can be especially concerning for those improving their properties.

When it comes to updating your homeowners insurance policy, it’s usually just a quick phone call to your insurance provider. In most cases they are aware of the market conditions and can easily make adjustments. Increasing insured amounts is not unusual in markets like these, but it will add to the annual premium cost. Updating your title insurance policy can also be done, but it will sometimes require additional information to justify the increase in value. If you are refinancing the property the appraisal is an easy solution. However, even if you aren’t in the process of refinancing, your property’s assessed value with the county can be enough to increase the limits on your title insurance policy. Similar to your homeowners insurance, this will add to the premium, but remember that title insurance is a one-time expense, so the added premium will only be paid one time. In order to update this you will need to contact the title insurance company that wrote the original policy. If you don’t remember who this was, you can usually reference your deed or contact your real estate agent who should have a record of this for you.

Title insurance on new construction?

March 12, 2018 By Tayson Rockefeller Leave a Comment

won’t go into too much detail on what a title insurance policy is, though you can read the article here: https://tetonrealtyblog.com/what-is-title-insurance/ which might be a good prerequisite to this article.

It dawned on me the other day that while it is common for almost all real estate transactions to be accompanied with some sort of title insurance policy, it’s important to remember that title insurance only covers the initial purchase price of a property. For example, if a claim is made and a defect in the title is found, the claim can only be made for up to the amount of the original purchase price. The next obvious question is, how about when a property is improved or the value of a property is increased?

With all of the new construction we are seeing throughout the area, I figured this was an opportune time to bring this to the attention of home owners and investors. Probably the most common example would be someone building a new home. With low residential home inventory and relatively affordable land costs, it’s becoming increasingly common to see people buying land with savings or home equity lines of credit then preparing to build in the future either with cash or a construction loan. When obtaining a construction loan, the lender will require a lender’s policy for the build (reference previous article), but there usually isn’t a seller involved to pay for a title insurance policy like a regular transaction between a buyer and a seller.

The result of the above scenario would be a home valued at several hundred thousand dollars with a title insurance policy protecting up to the value of the land, in many cases less than $100,000. If a defect is found in the title after the home is constructed, albeit an unlikely worst case scenario, it could be a very expensive proposition for the homeowner with inadequate title insurance.

Being that title insurance is extremely affordable and is only paid one time and is not recurring, this is something that anyone looking to build a home should consider. Fortunately all of our local title companies are experienced with writing these types of policies and can answer any questions that you might have.

What is Title Insurance?

October 1, 2016 By Tayson Rockefeller Leave a Comment

title-insurance ***Tayson is not a Title expert! Always consult with your Title Company, or attorney when reviewing an actual policy, or Commitment for Title Insurance.

Simplified, Title Insurance is basically a form of insurance which insures (a buyer) against Financial loss from defects in the chain of title for real property.

Usually we see two types. What is called an Owner’s Policy, and a Lender’s Policy or Mortgagee Policy.

Owner’s Policy
The Owner’s Policy is basically what is described above. It helps ensure the property gets properly vested with the purchaser, that it is free of liens and encumbrances, and usually covers losses and damages suffered in the event the title it is deemed unmarketable or there is no access, usually for the amount of the purchase price.

Lender’s Policy
The Lender’s Policy, sometimes referred to as the Mortgagee Policy is typically only issued to lenders. The policy benefits whomever holds the mortgage loan. These policies cover the lender for losses regarding some of the same issues set forth in the owners policy including access, but also the lien created by the mortgage to ensure that it remains enforceable. Your lender usually requires that you hold homeowners insurance to protect their interest in the event that home is damaged, and the same goes for title. They usually require that you have a lender’s policy to protect their interest with regards to the lien created by the mortgage and that the property continues to remain marketable.

Who Pays for these Policies?
In Teton County, it is fairly customary that the seller will pay for the Owner’s Policy, and that the buyer will pay for the Lender’s Policy if they are obtaining a loan. This is not always the case, buyers have been known to pay for the Owner’s Policy, and sellers have been known to pay all of the buyers closing costs which usually includes the cost of the Lender’s Policy. There are also extended policies available, I will go over and another post.

With the above said, it is important to remember that there are requirements that need to be met in order for these policies to be issued, and there are exceptions of which the title company does not insure. These are usually set forth in what is called a Title Commitment, which you have probably seen if you have purchased property in Teton Valley.

Title Commitment

A Title Commitment is basically the title company’s promise to issue a title insurance policy for the property after closing. The title commitment contains the same terms, conditions, and exclusions that will be in the actual insurance policy.

The Requirements section lists what things must be done before escrow can close and title insurance will be issued. If a requirement can not be met, close of escrow may be prevented or delayed. The Title Company will normally help make sure that these requirements are met prior to closing.

The Exceptions section discloses the exceptions that the Title Company will not cover against. It also generally includes certain standard exceptions such as mineral and water rights. The Title Insurance Policy will not insure against loss, nor will the title insurer pay costs, attorney fees, or expenses, resulting from title problems listed in this exceptions section, so it is important to review these in your Commitment for Title Insurance, before the actual policy is issued at close of escrow.

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