Consumer Counselor
Insurance Information for Michigan Consumers
[FIS-PUB 0218] Michigan Department of Insurance and Financial Services | 877-999-6442 | www.Michigan.gov/DIFS [11/19]
Title Insurance
For many people, the purchase of a home or
other real estate property is the largest
monetary investment they will make in their
lifetime. People will often purchase
homeowners insurance in order to protect this
investment; however, title insurance can be just
as crucial. Title insurance financially protects
you and your lender from any unknown claims
or defects in the title of the property you are
buying.
What Is a Title and What Does it Do?
“Title” means the collective ownership of rights
for a piece of property and includes all previous
transfers of ownership and liens on the
property. A title is not the same thing as a
“deed.” A deed is the legal document that
transfers title from one person to another.
A title documents your legal ownership or
interest in real property, meaning you have the
right to use that land and attached structures. It
may be a full or partial interest in the property.
For example, you may retain ownership of a
piece of real property, but you may transfer
certain rights, such as mineral rights, to
someone else. Unlike transferring title to an
automobile, title transfers involving real property
are more complex because land usage may
change over time.
What Is Title Insurance?
Title insurance is an insurance policy that
covers past title problems that come up after
you buy or refinance a home and that are
unknown at the time of purchase. A title
insurance policy does not cover ownership
issues that arise after you have purchased a
home or other real estate property.
There Are Two Types of Title Insurance.
Both the owner’s policy and the lender’s policy
protect the named insureds against past losses
that can occur after a real estate settlement.
1. Owner’s Policy - An owner’s policy
protects a buyer’s ownership interest in
real estate if a past title or ownership issue
comes up after the purchase.
2. Lender’s Policy - A lender’s policy
protects the lender in the event a past title
or ownership problem arises after the real
estate transaction. If you are borrowing
money from a financial institution for the
real estate purchase, the lending institution
will probably require you to buy a lender’s
policy to protect its interest as well.
What Is a Title Search?
A title search is a routine part of a property
transaction and the cost to conduct a title
search is typically included in the price of title
insurance. Before issuing a policy, the title
agent or company conducts a detailed review of
historical public records to see if there are any
title concerns with the property you are looking
to buy. These records include, but are not
limited to, court judgments, deeds, mortgages,
wills, divorce decrees, tax records, and maps.
What Are Title Defects?
Title defects, often referred to as unknown
claims or encumbrances, can result in
substantial financial losses, up to and including
loss of ownership of the property. If you have a
title insurance policy, the insurance company
will defend your title in court and pay any
settlement amount you owe to clear the title, as
[FIS-PUB 0218] Michigan Department of Insurance and Financial Services | 877-999-6442 | www.Michigan.gov/DIFS [11/19]
long as the defect is a covered item. Following
are examples of title defects:
liens on a property
lost, forged, or incorrectly filed deeds
property access issues
mortgage or property taxes not paid by
a prior owner
an unknown or missing heir making
claim to the property
How Does Title Insurance Work?
When you purchase title insurance, the agent or
company will search public records to
document the chain of ownership of a property.
If any liens or defects are found, the title
company will either cure them before issuing a
title policy, or exclude them from coverage.
Once the company believes that the property
title is clean, they will issue you and your lender
title insurance policies. These insurance
policies protect you and your lender financially
from any unknown claims or defects existing at
the time of purchase.
Where Do I Buy Title Insurance?
Title insurance can be purchased through a
licensed title insurance agency or directly from
a title insurance underwriter authorized to do
business in Michigan.
What Is a Title Insurance Commitment?
A title insurance commitment is a document
that is prepared after the title search that lists
the known existing defects. It is used at the
real estate closing to insure a specific property
if certain conditions are met. Generally, defects
that cannot be cured are excluded from
coverage. It is prudent to review the
commitment thoroughly, with a title insurance
professional or attorney, before you finalize
your real estate transaction.
How Much Will the Policy Cost?
A title insurance policy is issued for the current
value of the property. The owner’s policy is
typically valued according to the purchase price
for the property. The lender’s policy is
determined by the amount of the loan. There is
no benefit to overinsuring, and under-insuring
may result in insufficient coverage. There may
be discounts if you buy an owner’s and lender’s
policy from the same insurer (simultaneous
issue rate) or if you buy a policy from an insurer
that has previously insured your property
(reissue rate). Refinancing rates may be
available as well.
Who Pays for the Policy?
Either the seller or the buyer can purchase the
owner’s policy; however, there is likely a local
customary practice in your area. Ask your real
estate agent for clarification. Also, the person
that pays for the insurance has the right to
choose the title insurance provider.
The lender will typically require the borrower to
purchase a lender’s policy for the benefit of the
lender as a condition of the loan. The lender
may request or insist on a specific provider
according to its needs. Premium for a title
insurance policy is made with a one-time
payment at the time of closing.
What About Closing or “Settlement”
Services?
Many title insurance agencies also act in the
capacity of a settlement services agent. As
such, they will prepare and/or collect the
necessary documents required to finalize the
real estate transfer and execute the loan. They
will set a closing with both the sellers and the
buyers.
It is common, but not required, that the title
agency providing the insurance will also
conduct the closing. Closing agents charge fees
for the settlement services they provide. It’s
important that you ask about their fees if you
are shopping for both a title and closing agent.
There may be additional coverages available to
you, for an additional charge, which are not part
of the title insurance, but are offered by some
insurance companies that will protect you in the
[FIS-PUB 0218] Michigan Department of Insurance and Financial Services | 877-999-6442 | www.Michigan.gov/DIFS [11/19]
case of theft or misappropriation of money
associated with the settlement services. It is
appropriate to inquire about a “closing
protection letter.”
When Does My Policy End?
An owner’s policy will cover you as long as you
own interest in the property. It may also cover
anyone who inherits the property from you. A
lender’s policy ends when you pay off your
mortgage.
Although it is not necessary to purchase a new
owner’s policy when you refinance a home,
most lenders require a new policy based on the
new transaction amount. Likewise, defects in
title might have arisen between the original
purchase and the refinance. The new policy
would also cover defects not detected when the
previous policy was issued.
How Do I File a Title Insurance Claim?
Your insurance policy will include instructions
and requirements for submitting a title
insurance claim. If you need assistance,
contact your agent, the company, or DIFS with
questions regarding claims.
Tips When Buying Title Insurance:
Deal with only licensed title insurance
professionals.
If shopping for a title and settlement
provider, compare premiums, discounts,
settlement fees and services.
Be sure the property being acquired and/or
mortgaged is correctly described in all
statements.
Be sure to check the effective date of the
policy so that it goes into effect the day you
become the legal owner of the property.
Never pay the premium in cash or bring
cash to a closing. A personal check, money
order, or cashier’s check are better options.
Ask about being insured for the “gap.” The
gap is the period between the effective date
on the commitment when the transaction is
closed and when the documents (deed and
mortgage) are recorded at the Register of
Deeds.
Where Do I Complain if I Believe the Agent
or the Company Is Not Treating Me Fairly or
Handling My Escrow in the Proper Manner?
If you believe the agent or the company is not
following standard business practices, you can
report the activity to the DIFS at its toll-free
number: 1-877-999-6442.
About DIFS
The mission of the Michigan Department of
Insurance and Financial Services is to ensure
access to safe and secure insurance and
financial services fundamental for the
opportunity, security and success of Michigan
residents, while fostering economic growth and
sustainability in both industries. In addition, the
Department provides consumer protection,
outreach, and financial literacy and education
services to Michigan citizens. For more
information please contact DIFS at 877-999-
6442 or visit www.michigan.gov/DIFS
