What you’ll learn (TL;DR)
The matters that are covered by your title insurance policy are called “covered risks.” Things that are not listed in the “Covered Risks” section of your policy are not covered. Exceptions and exclusions are also not covered.
There are two types of exceptions: standard exceptions and special exceptions. Standard exceptions appear in all policies issued, but they vary between geographic areas, and some may be removed if certain conditions are met. Special exceptions are unique to your property, such as matters that were found in the title search.
Exclusions are also not covered by your policy, but unlike exceptions, they are the exact same in every policy and generally cannot be removed. Common exclusions include government regulations, problems you cause, and future events.
An Overview of Title Insurance
Title insurance protects you from legal challenges to your title, or the ownership of your property. The matters that are covered by your title insurance policy are called “covered risks.” Examples are missing owners, liens,
A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens.
and document errors. An owner’s title insurance policy covers 10 to 33 different covered risks (depending on the policy type) that can impair your ownership. The policy also covers defense costs, which means that the title insurance company will pay for the legal fees to defend your title. To learn more, read
What is title insurance and why do I need it? Things that are not listed in the “Covered Risks” section of your policy are not covered. In addition, even if something technically falls within a covered risk, it may not be covered if an exception or exclusion applies.
Title Insurance Exceptions
Exceptions are matters that are not covered and are listed in Schedule B of your policy. There are two types of exceptions: standard exceptions and special exceptions. Standard exceptions appear in all policies issued, but they vary between geographic areas, and some may be removed if certain conditions are met.
Common Standard Exceptions
- Taxes and assessments. Your title company will typically make sure any past due taxes are paid at closing. However, you will be responsible for any taxes that are assessed against your property after your purchase, and these taxes are an exception in your policy.
- Adverse possession. Adverse possession is when someone gains rights to property through use and possession for a certain period of time. For example, if a person fences in a portion of their neighbor’s backyard and uses the land without their permission for the legally required amount of time, they may gain ownership of that property.
- Survey issues. Many policies include an exception for matters that would be shown on a survey, such as boundary disputes between neighbors or encroachments, which are structures that extend past the property line. For example, there may be a conflict between deeds as to the location of a boundary line, or an owner’s fence may extend onto their neighbor’s land.
- Mechanic’s liens. Mechanic’s liens are liens
A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens.
in favor of unpaid contractors and subcontractors who work on the property. For example, if a new pool is installed or the house is remodeled, but the workers are never paid, state law may allow a lien against the property for the amount they are owed.
- Mineral rights. Mineral rights are the ownership of the natural resources located beneath the surface of land, such as oil, coal, and rock.
Many of these exceptions can be removed from your policy under the right conditions. For example, the title company may need a survey, or a special title search, or an affidavit from the seller (which is a statement where the signer promises that information is true).
Special Exceptions
Special exceptions are unique to your property. For example, the lien
A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens.
for your mortgage loan is not covered by your policy because you agree to the lien when you sign your mortgage documents. Other special exceptions are matters that were found in the title search, which is when the title company reviews the property’s history in the public land records. Examples of things that may be found in the title search and listed as special exceptions are easements
An easement is the right to use part of someone’s property for a particular purpose. For example, neighbors may have easements over each other’s property to use a shared driveway. Utility companies often have easements to run utility lines across private property.
and HOA declarations
HOA declarations are rules for the neighborhood. For example, the HOA may require payment of dues, prohibit rental property, or limit parking.
that affect your property. These matters should be disclosed to you before you buy your home, so you can decide whether to buy the property with these issues.
Title Insurance Exclusions
Exclusions are also not covered by your policy, but unlike exceptions, they are the exact same in every policy and generally cannot be removed. Common exclusions include:
- Regulations. Government regulations are typically not covered unless a violation of law has been filed in the public records. For example, title policies do not insure that your home was built in compliance with building codes.
- Problems you cause. Title defects resulting from your own actions are not covered, for example, if you fail to pay a debt that becomes a lien on your property, or you build a fence that extends onto your neighbor’s land.
- Undisclosed issues. Things you learn about the property that you do not disclose to your title company are not covered. For example, the seller tells you that a neighbor has an unrecorded easement
An easement is the right to use part of someone’s property for a particular purpose. An easement is “unrecorded” if it hasn’t been filed against the affected property in the public land records.
to use the property’s driveway, but you buy the house anyway and fail to tell your title company about the issue.
- No loss. Defects that do not cause you loss or damage are not covered by your policy. For example, older properties may have issues in the chain of title that were never cleared but are no longer problems due to the passage of time, like an expired mortgage or an old restriction that is no longer enforced.
- Future events. Title insurance is different from other types of insurance because it covers problems from the past. Things that happen in the future, like a lien for unpaid property taxes that become due after your purchase, are not covered. However, some policies, such as the First American Eagle Policy, cover a few future situations, like if someone forges a deed to your home.
- Bankruptcy issues. You’re not covered if your purchase is void because your seller violated bankruptcy laws, but you may have coverage if a transfer that happened before your purchase is void. For example, if someone has a lot of debt and sells property to hide it from creditors, a bankruptcy court may invalidate the sale.
- Amount of land. A title policy insures that the legal description
A legal description is the exact location of property and its boundaries. It’s different from the property address, which is the street name and number assigned by the local government.
in your deed is correct, but it does not insure the amount of land you own. For example, if a deed mistakenly states that a property is 5 acres, but the property is actually only 4 acres, the missing acre would not be covered.
Learn More about Title Insurance
Exceptions and exclusions are matters not covered by title insurance. To learn more about what’s covered and the different policy options available, read
Title Insurance Options for Homeowners.