Title insurance protects you when faced with unknown defects in title to your property. Title agents add endorsements to the policy to tailor it to the buyer’s and/or lender’s needs or requirements. Title policy endorsements are used to expand protection for the buyers and/or lenders.
Like all title policy forms, title policy endorsements are managed by the American Land Title Association (ALTA) and are adopted on a state-by-state basis through each state's department of insurance. Periodically, policies and endorsements are revised. Title endorsements may differ for buyers and lenders, even though they appear to have the same endorsement number and/or name.
When would I need a title policy endorsement? A title policy endorsement is utilized to expand the coverage of the policy to include additional coverages. For example, a buyer of a condominium would be wise to seek the endorsement that provides protection against numerous issues including violations or forfeiture clause. Moreover, a lender may seek a zoning endorsement that insures against the loss due to the property not being able to operate in the manner in which it was intended due to a zoning regulation. These are just two real-world examples of the use of endorsements to enhance a title insurance policy. Depending on your state there may be many more endorsements available.
Are title policy endorsements necessary? Most lenders do require them on a Lender’s Title Insurance Policy. Typically, a lender will at least require coverage from environmental issues (ALTA 8 series) and those related to covenants, conditions, and restrictions. They can also be requested by the purchaser/borrower (ALTA 9 series). While purchasers/borrowers don’t have a say on the endorsement on the lender’s policy, they may ask for an endorsement to be included on their policy, if available. Not all endorsements are available to an Owner's Policy due to the additional coverage already included in those policies.
Why should I care about endorsements? In addition to enhancing the coverage of the policy, each endorsement costs an additional amount of money. While some are a flat rate, others are based upon the amount of insurance and go up and down in a correlative manner. The cost of policies and endorsements vary from state to state based on each state's department of insurance regulations.
The lender will tell the title company what lender-specific endorsements must be added to their policy in order to fund the transaction and close. Checking with the lender ahead of time or the title company once it receives the list will give you a greater idea of what endorsements are being required by the lender and what additional costs you may incur as part of the transaction.
If you have any questions regarding title insurance or title insurance endorsements, please contact Joseph Marriott at joseph@qtsnola.com or (504)834-7171.
Comments