A title endorsement acts as a customized addition to your standard title insurance policy, protecting you or your lender from specific risks typically excluded by a basic policy. Standard title insurance covers common issues such as ownership disputes or hidden liens, but endorsements address particular concerns like zoning violations, encroachments, or easements.
When purchasing real estate, both the buyer and lender obtain title insurance policies to guard against financial loss from title defects. However, standard policies include “exceptions”—specific risks they do not cover. A title endorsement removes one or more of these exceptions by providing targeted coverage for those risks, typically for an additional one-time fee paid at closing.
Mortgage lenders usually require certain endorsements to protect their investment. For example, endorsements such as ALTA 9 (Restrictions, Encroachments, and Minerals) or ALTA 3.1 (Zoning) are commonly mandated. Buyers can also choose endorsements for their Owner’s Title Policy to enhance their coverage. Some common endorsements include:
- Restrictions, Encroachments, Minerals (ALTA 9): Protects against deed restriction violations, property encroachments, and issues from mineral extraction.
- Zoning (ALTA 3.1): Covers losses if the property’s use violates local zoning laws.
- Access and Entry (ALTA 17): Guarantees legal and physical access to the property.
- Encroachment (ALTA 28.1): Provides coverage if a neighbor’s structure intrudes on your property boundary.
Deciding which endorsements to add is usually led by the lender based on the title report and property survey. Buyers should consult with their real estate attorney or title agent to understand if additional endorsements on their Owner’s Policy are beneficial, especially if property surveys reveal potential issues.
A crucial takeaway is that a standard title insurance policy does not cover every possible risk. Reading the “exceptions” section in your title commitment document is essential. Title endorsements are not unnecessary fees; they offer real protection that could save you from costly legal disputes.
For more detailed information on title insurance basics and coverage exceptions, visit our Title Insurance glossary entry.
References:
- American Land Title Association (ALTA) Endorsement Forms
- IRS Taxes & Real Estate Topics at IRS.gov (for related property tax considerations)
Investopedia on Title Endorsements
Forbes Advisor: What Is A Title Endorsement?
This glossary entry helps clarify how title endorsements work and why they could be essential for both homebuyers and lenders.