In Texas, standard exceptions to title insurance coverage include restrictive covenants, survey and boundary issues, and homestead, community property, and survivorship rights.
Depending on your real estate transaction, you may be able to request changes to certain exceptions if you meet the title company’s requirements.
Read on to understand these title insurance exceptions. I’ll also provide sample situations to show how each exception affects homebuyers like you.
When buying a home in the U.S., title insurance (owner’s policy) protects you against financial losses caused by certain title defects, liens, or similar issues that existed before the home purchase, such as unpaid property taxes, forged documents, or previously unknown heirs.
The title company pays for covered losses if there’s a claim against your property.
However, there are standard exceptions, which refer to specific issues or risks the insurance policy does not cover.
For example, if your policy doesn’t cover boundary-line issues, the title company won’t pay a claim resulting from that issue because the policy lists it as an exception.
You’ll find standard exceptions in Schedule B of the title commitment, a document that outlines the title company’s terms, conditions, requirements, and exceptions before issuing the final title insurance policy.
Remember: Your title agent will review public records to find title issues that may have to be addressed before you purchase the home. The review will likely include deeds, mortgages, liens, tax records, wills, and other public records.
Here are the standard exceptions to title insurance in Texas and sample situations that the title company may not cover:
Restrictive covenants - The policy may not cover recorded property restrictions.
Survey and boundary issues - The policy may not cover issues related to property lines, boundary-line conflicts, encroachments, or overlapping improvements.
Homestead, community property, and survivorship rights - The policy may not cover certain ownership rights of a spouse under Texas law.
Water and shoreline rights - The policy may not cover certain claims related to shorelines, lakes, tidelands, rivers, and water rights.
Taxes and assessments - The policy may not cover certain current or future property taxes and assessments.
Remember: Be sure to review your title commitment thoroughly before closing to understand your coverage, property rights, and possible risks.
Also found in Schedule B of your title commitment, special exceptions are property-specific issues the title company discovers during title examination.
The title company must describe each specific item that’s being excluded from coverage.
Special exceptions may include:
For example, a recorded easement allows a utility company to access part of the property.
Key Takeaway: While standard exceptions are general limitations found in Texas title insurance forms, special exceptions are particular matters that affect the property you’re buying.
In Texas, title agents use standardized title insurance forms approved by the Texas Department of Insurance (TDI). This means the policy language is mostly the same regardless of the title company.
However, you may be able to request that the title agent modify or remove certain exceptions in Schedule B if you resolve the title issue or purchase extra coverage when available.
For example, the title company may amend the area and boundary exception if the additional risk is deemed insurable and you can provide an acceptable survey that meets the company’s requirements.
Remember: If necessary, request changes to standard exceptions before closing upon careful review of your title commitment. Your title company may not cover a newly discovered property issue if it’s excluded in the final title policy.
Whether you’re a first-time homebuyer or purchasing a second home, the mortgage process can feel overwhelming.
Our trusted loan officers at Texas United Mortgage are here to make homeownership smoother for you. We’ll help you explore financing programs that fit your goals and make smarter decisions.
If you have questions about Texas title insurance standard exceptions or any other part of the homebuying process, we’re ready to guide you.
Reach out to us now to get started!
Next, find out how much homeowners insurance is in Texas to prepare for homeownership costs.