Title Insurance is a critically important method of protecting consumers.
A title insurance policy tells you the condition of the title to your property and insures that you actually own the property. The premium for title insurance is paid once, at the closing, and it insures you for as long as you own your property. In Florida, title insurance is underwritten through large insurance companies and issued through both commercial title agencies and attorney title agents. The rates for title insurance are set in Florida by the Office of Insurance Regulation (the “Promulgated Rate”), and is the same whether it is written by an attorney agent or a non-attorney agent.
The issuance of title insurance is a two step process. The first step is the issuance of a commitment. The commitment is issued after an initial title search and before closing. A title insurance commitment has three parts:
- Schedule A contains the name of the present owner of the property (typically the seller), the names of the buyer of the property, the mortgage lender on a purchase money mortgage or refinance, and the legal description of the property.
- Schedule B-I of the commitment contains the Requirements, that is, a list of things that must be done to clear the title to the property prior to closing. This usually includes the seller deeding the property to the buyer, the buyer giving a mortgage to the mortgage lender, and paying off all existing liens at closing, but it may include other steps that must be taken to remove any possible clouds on the title.
- Schedule B-II contains a list of all of the exceptions to the title. These may include easements, restrictive covenants, and other items.
- When the closing agent gives you the title insurance commitment, the closing agent should also give you copies of all of the documents listed in Schedule B-II of the commitment.
The second step is the issuance of the final title insurance policy. After the closing takes place and the deed is recorded, the title search is updated through the recording of the deed to make sure that no intervening instruments (clouds) affecting the title have appeared.
The effective date on your title insurance policy is the date on which your deed is recorded.
There are two parts to your title insurance policy: Schedule A of the policy lists your name as the owner of the property and gives the legal description of the property. Schedule B of the policy lists the exceptions to the policy. Schedule B of the policy should be identical to Schedule B-II of the commitment.
Title insurance agents, like mortgage brokers, are sometimes involved in fraudulent activities. If any of the following happens at your closing, you should stop the closing and consult an attorney before proceeding:
- There should be only one HUD-1 settlement statement at your closing. You may have to sign several (identical) copies of this closing statement. However, if the closing agent asks you to sign two or more different settlement statements, there is something unusual, and you should consult an attorney before proceeding.
- The purchase price on the HUD-1 should be the same as the purchase price that you agreed to pay in your contract. It should not be higher or lower.
- The money that the HUD-1 shows is your share of the purchase price should be the actual amount that you have paid.
- All of the documents you sign at closing should contain only true statements. If you are asked to sign anything that is not true, you should refuse to go on with the closing.
There is an important limitation with title insurance you should be aware of: the amount of protection you receive is limited by the face value of the title insurance policy. This is normally the purchase price. If, for example, a claim arises years after your purchase of real estate, the most you will receive is that amount (what you originally paid for the property), which doesn’t include property appreciation over the years, or improvements you made to the property. That is another reason that accurate and thorough preparation for closing is crucial.
On the positive side, when notified of a title claim, the title insurance underwriter will attempt to rectify the problem if it can, whether it be by bringing lawsuits, or taking other actions to protect your title. None of this is at any expense to you.