What is Commercial Title Insurance?
When a piece of commercial property is financed, purchased, or sold, a record of that transaction is generally filed in public land records.
Likewise, other issues and events that may affect the ownership of a property are also documented and filed. These may include liens, mortgages, restrictions, easements, etc. When a buyer purchases title insurance, the title company searches these records to find (and resolve, if possible) issues that may affect the purchaser’s ownership.
Title Search & Exam
That’s where title insurance differs from traditional insurance models.
When you purchase a policy insuring you for matters relating to your car or health, the insurance company assesses the risk of insuring you and bases its premium on the risk being assumed. With title insurance, the insurer first works to identify the status of ownership, liens, and other matters affecting title by collecting documents affecting title from the public records that are statutorily identified for the recording of real estate transactions. This process is called the search. Once the search is complete, the title insurance underwriter can determine the title’s insurability and list exceptions from coverage and requirements to insure.
Of course, even the most skilled title professionals may not find all title problems. Other risks include matters that are more difficult to identify, such as title issues resulting from filing errors, forgeries, undisclosed heirs, and other unforeseen problems. That’s one reason why your title insurance policy can play a crucial role in protecting your commercial real estate investment.
When you purchase a commercial property by securing a mortgage, you will be required by your lender to purchase a loan policy of title insurance. This policy insures the lender against covered title defects up to the amount of insurance. This coverage in favor of the lender lasts for the life of the loan under limited circumstances stated within the policy.
You will also have the option of purchasing an owner’s policy of title insurance, which provides insurance directly to the insured owner listed in the policy, and describes the type of real property interest owned. The insurance in both an owner’s and a loan policy is subject to the policy provisions, which include the covered risks, exclusions from coverage, the conditions, and the exceptions to title listed on a schedule to the policy.