The Owner’s Policy insures a purchaser that the title to the property is free from defects (liens and encumbrances), except those which are listed as exceptions or exclusions in the policy. It covers losses and damages suffered if the title is not good and indefeasible (i.e., if the title can not be legally defeated by another party). For example if an interest in the property is found to belong to someone else, if there is no legal access to the land (if this coverage is provided), or if there is some other defect on the title. An Owner’s Policy specifically lists what interest in the property is insured as of what effective date. The policy also contains various standard exclusions to coverage and also specific exceptions to coverage, based on documents that have been recorded against the property at some point in the past, that the title company is unwilling to insure against.
The policy limits of the Owner’s Policy is typically the purchase price paid for the property. As with other types of insurance, coverages can also be added or deleted with an endorsement. There are many forms of standard endorsements to cover a variety of common issues. The premium for the policy may be paid by the seller or buyer as the parties agree. In Texas the Seller customarily pays for issuance of the owner’s policy. Who pays for the policy is typically specified in the real estate contract. Consumers should inquire about the cost of title insurance before signing a real estate contract which provides that they pay for title charges. A real estate attorney, broker, escrow officer, or loan officer can provide detailed information to the consumer as to the price of title insurance before the real estate contract is signed. Title insurance coverage lasts as long as the insured retains an interest in the land insured, and typically no additional premium is paid after the policy is issued.