If you obtain title to property through inheritance or gift, you may not have title insurance on that property. When you purchase real estate in Colorado, the contract generally requires the Seller to purchase a title insurance policy for you. Before Closing, the title insurance company reviews the public records and prepares a title commitment. The title commitment lists the documents the Seller and Buyer must provide at Closing. It sets out the legal description and lists the names of the owners of the property. The commitment also has a list of exceptions to title. The Buyer will take title subject to these exceptions unless action is taken to remove them. If the Buyer suffers any loss because of claims based on these exceptions, the title insurance will not protect the Buyer. After the title commitment is issued, the title company may issue various endorsements, which modify the policy. After Closing, the title company will deliver the title policy to the Buyer. If the Buyer finances the purchase, the lender will also receive a mortgagee’s title policy at the Buyer’s expense.  

What title insurance policy covers:

However, some problems cannot be found even through a thorough examination of the public records. Such problems include forged deeds, false impersonation of owners of land, fraud, deeds by minors, and incompetent persons. Generally, your title policy insures you against losses based on such claims. The title policy also insures you against claims based on matters which do appear on the public record but which the title policy neglects to list as an exception on the title policy. For example, if the title company fails to disclose as an exception a recorded easement allowing someone to drive across your property, it insures you against losses you may suffer because of that easement. The title policy typically requires the title company to assist you in resolving claims and will defend you in court, if necessary.

What the title insurance policy does not cover:

Like other insurance policies, there are many exceptions to the coverage of a title insurance policy. The following is a partial list of such matters:

• It does not insure your ownership of water or mineral rights.

• The policy insures that you have access to your property, but it may not be a desirable or convenient means of access. You may purchase an endorsement that insures access to a specified street.

• Unless modified by endorsement, it will not insure against the effect of laws, ordinances, or governmental regulations, such as zoning ordinances and environmental protection laws.

• The title policy will not insure against defects of which you are aware but which you do not disclose to the title company.

• The title policy will not insure matters that occur after the effective date of the policy.

Things you can do to make your title insurance policy more effective.

• Like any other insurance, your title insurance policy is only as good as the title company which issues it. Make sure the title company which issues your policy is financially sound and will be able to stand behind its policy. You may be able to specify the identity of the title company in your purchase contract.

• Your title insurance commitment generally does not provide coverage for unrecorded easements, matters which would be discovered by a survey, unrecorded mechanics’ liens, the gap between the effective date of the commitment to the date the deed is recorded, unpaid taxes, assessments and unredeemed tax sales prior to the year of Closing. These are commonly referred to as standard exceptions. You should take whatever action is necessary to have these exceptions removed from your title policy. The title company will often require that you obtain a survey or an improvement location certificate as a condition of removing these exceptions. Your purchase contract should specify which party is responsible for the costs of removing these standard exceptions.

• In addition to the standard exceptions, your title commitment will probably also list other exceptions, such as easements, mineral leases, and covenants. The title company will not protect you from losses covered by these exceptions. Review the exceptions listed on your title commitment very carefully. Satisfy yourself that the exceptions do not affect the marketability of your title or your ability to use the property as you intended.

• You will receive your title policy a few weeks after closing. Compare the title policy with the commitment to make sure that it is correct. Keep the policy in your safe deposit box or other secure location.

You should never discard a title policy, even if you no longer own the property described in that insurance. If you sign a warranty deed when you sell the property, you could be subject to claims long after the sale is finalized. Your title insurance policy may offer you protection against such claims.