If you are buying a home in Missouri, title insurance helps protect against certain problems involving legal ownership of the property. Unlike homeowners insurance, which generally protects against future events affecting the home and belongings, title insurance focuses primarily on covered title problems that existed on or before the policy date.
Quick answer: Title insurance can protect a homeowner or mortgage lender from covered financial losses caused by defects in title, liens, encumbrances, unmarketability of title and certain other ownership-related problems. Missouri law specifically recognizes these types of risks in its definition of a title insurance policy.
What does title insurance protect against in Missouri?
A title problem can exist even when a buyer and seller believe the transaction is straightforward. Public records, prior ownership, liens and other documents can affect whether a seller can convey the interest in the property that the buyer expects to receive.
Under Missouri law, a title insurance policy may insure against covered losses involving title being different from what the policy states, defects in title, liens or encumbrances, unmarketability of title, lack of a legal right of access and, for an insured mortgage, certain problems involving the validity or enforceability of the mortgage lien.
Examples of issues that can create title concerns include unpaid taxes, unreleased deeds of trust, judgments, recording errors, competing ownership claims and other matters affecting the property. Whether a particular issue is covered depends on the specific policy, its exclusions and its exceptions.
What is the difference between owner’s title insurance and lender’s title insurance?
There are two common forms of title insurance in a financed residential purchase.
Owner’s title insurance
An owner’s title insurance policy protects the insured homeowner’s interest in the property against covered title risks. The Consumer Financial Protection Bureau explains that owner’s title insurance can protect a homeowner when someone later asserts a claim against the home arising from before the homeowner purchased it.
Lender’s title insurance
A lender’s title insurance policy protects the mortgage lender’s interest rather than the homeowner’s equity. Mortgage lenders commonly require lender’s title insurance as a condition of the loan. A lender’s policy does not substitute for an owner’s policy because the two policies protect different insured interests.
Is owner’s title insurance required in Missouri?
Owner’s title insurance is generally different from lender-required coverage. When a mortgage lender requires a lender’s policy, that policy protects the lender. A buyer should separately consider whether to obtain an owner’s policy to protect the buyer’s own insured interest in the property.
Missouri law specifically addresses situations in which a lender’s title insurance policy is issued with a purchase mortgage and no owner’s title insurance policy has been requested. In those circumstances, Missouri law requires written notice to the purchaser-mortgagor when the commitment is prepared.
What is a Missouri title commitment?
A title commitment is not the same thing as the final title insurance policy.
Missouri law defines a title insurance commitment as a preliminary report, commitment or binder issued before the title insurance policy. It contains the terms, conditions, exceptions and other matters under which the title insurer is willing to issue the policy. Missouri law also makes clear that a title commitment is not an abstract of title.
In practical terms, the commitment is one of the most important documents to review before closing because it identifies the proposed insurance coverage and matters that may need to be addressed or that may be excepted from coverage.
What should a buyer look for on a title commitment?
Buyers should pay particular attention to the requirements and exceptions shown in the commitment. Requirements generally identify matters that must be satisfied for the contemplated policy to be issued. Exceptions identify matters that will not be covered by the policy unless they are removed, modified or otherwise insured over as permitted by the underwriter.
Missouri law requires certain commitments offering an owner’s policy on the resale of owner-occupied residential property to warn consumers to read the exceptions and terms carefully because exceptions provide notice of matters that are not covered under the policy.
Why is a title search performed before issuing title insurance?
The title process is designed to identify matters affecting ownership and the proposed insured interest before the policy is issued. Missouri law requires title insurance to be based on a title search using appropriate title evidence before a policy is written, subject to the statutory framework.
The title company may identify items that need to be resolved before closing, such as existing liens or other recorded matters. Resolving these issues before the transaction closes can help the buyer, seller and lender move toward a properly documented transfer.
Does title insurance cover every property problem?
No. Title insurance is subject to the terms of the policy, including exclusions, exceptions and conditions. A matter specifically excepted from coverage generally is not insured simply because a title policy exists.
This is why reviewing the title commitment before closing is important. If you have questions about a requirement, exception or other title matter, ask the title company before closing rather than assuming it will be covered.
How long does title insurance last?
Owner’s and lender’s policies protect different interests and their duration depends on the applicable policy terms. An owner’s policy is associated with the insured owner’s covered interest, while a lender’s policy protects the insured lender’s mortgage interest. Your title professional can explain the specific policy being issued in your transaction.
Frequently asked questions about Missouri title insurance
Is title insurance the same as homeowners insurance?
No. Homeowners insurance and title insurance address different types of risk. Homeowners insurance generally deals with covered events involving the property after purchase, while title insurance generally addresses covered defects or other title matters existing on or before the policy date.
Does a lender’s title policy protect the buyer?
A lender’s title policy protects the lender’s insured interest. Buyers who want title insurance protecting their own insured ownership interest should consider an owner’s title insurance policy.
Is a title commitment the actual insurance policy?
No. In Missouri, a title commitment is the preliminary document setting out the terms, conditions and exceptions under which the insurer is willing to issue the title insurance policy.
Can a title commitment contain exceptions?
Yes. Exceptions are important because they identify matters that the proposed policy will not cover unless the exception is removed, modified or otherwise addressed according to the transaction and underwriting requirements.
Who should I contact if I do not understand a title requirement or exception?
Contact your title company before closing. A title professional can explain the title process and the documents being requested. Questions requiring legal advice should be directed to a qualified real estate attorney.
Working with a Missouri title company
Title Resources provides title and closing services for real estate transactions in Missouri. Our team works with homebuyers, sellers, real estate agents, lenders and investors to help identify title matters, coordinate closing requirements and move transactions toward closing.
Title Resources is located at 214 N. Clay Ave., Suite 100, Kirkwood, Missouri 63122. To discuss a Missouri real estate transaction, contact Title Resources at (636) 527-9670 or orders@TitleResourcesInc.com.
Authoritative resources
For additional information, review Missouri Revised Statutes Section 381.015, the Missouri Department of Commerce and Insurance Title Insurance Law resources, and the Consumer Financial Protection Bureau’s explanations of owner’s title insurance and lender’s title insurance.
This article is for general informational purposes and is not legal advice. Coverage depends on the terms, conditions, exclusions and exceptions of the specific title insurance policy.
