What Does Title Insurance Not Cover?

While title insurance is an essential safety net, it’s important to know its limitations. Inexperienced buyers may confuse it with homeowner’s property insurance or a home warranty, but they are vitally different. 
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While not all title policies cover the same things, there are a number of items that are unlikely to be covered in a general title insurance policy. It’s important to educate your buyers on the proper title insurance coverage. Some of the items that may or may not be covered are: 

• Any defects created after the issuance of the policy, or defects that the homeowner creates.
  
• Defects, repairs, or non-compliant work done by previous owners typically fall outside title insurance protections. It’s important for the buyer to get a home inspection. 
  
• Issues arising from the homeowner failing to pay their mortgage.
  
• Issues arising from the homeowner failing to obey the law or certain covenants.
  
• Specific taxes and assessments.
  
• Violating zoning or building ordinances related to land use, improvements, or environmental protection.
  
• Restrictive covenants that limit the use of the property. Rules governing the appearance and use of the property can be punished by heavy fines, which are not covered by title insurance. 
  
• Condemned land.
  
• Claims from others who might have rights to your property if a body of water (river, stream, lake, etc.) is on or near the property.
  
• Pest infestations.
  
• Mold or mildew.
  
• Fire or weather damage.
  
• Boundary line issues that would be discovered by a survey.
  
• Unrecorded mechanics liens.
  

It's important for home buyers to be aware of title insurance matters during transactions. And while it is not your role as a real estate practitioner to offer advice about specific policies, it is helpful if you can point out issues that clients need to investigate further. After all, the seller’s disclosures may affect your client’s title insurance coverage for future claims.