What is title insurance on land?
Title insurance on land is a policy, bought for a one-time premium, that protects against loss from covered title defects, liens and encumbrances that arose before the insured took title. A buyer who borrows will have a loan policy required by the lender. The owner's policy naming the buyer is one the buyer may choose to purchase, and its exclusions and exceptions limit what it covers.
Two title policies can be written on one land purchase
On the settlement statement for a financed purchase of land, title insurance can appear twice. The two policies share a name and little else. The practical question at the table is which of them anyone is actually obliged to buy.
Virginia defines title insurance as insurance against loss because of liens and encumbrances on property, defects in the title, and other matters affecting the title or "the right to the use and enjoyment of property". The State Corporation Commission's consumer guide then separates the two policies by who they name.
| Loan policy | Owner's policy | |
|---|---|---|
| Who is named | The buyer's lender | The buyer |
| Who wants it | The lender will require it | The buyer may purchase it |
The glossary's short definition of title insurance covers the term itself. The full working of both policies, from the search to a claim, is set out in title insurance, explained.
Covered problems are the ones already there when you took title
The easiest way to misread title insurance is to picture it as protection for whatever happens to the land after you own it. The SCC's guide describes the opposite.
Coverage becomes effective on the date the transfer is recorded in the local land records, and it reaches problems or hidden risks that occurred before the insured took title. What kinds of recorded items leave a title in doubt is the subject of what a cloud on title is.
Read the terms before relying on the name. A policy does not cover losses listed under its exclusions and exceptions, and those lists belong to the particular policy, so they come from the title insurer or the settlement agent for that purchase. Where the insurer is required to defend title against a covered claim, the guide lists payment of the insured's legal expenses among the benefits.
Two Virginia title rules carry a residential limit in their own words
Buyers of vacant land sometimes hear about title rules that were written with houses in mind. Both of the ones this page rests on are written in terms of residential property.
The first is a settlement notice. Under Va. Code 38.2-4616, in a purchase of an interest in "residential real property", the settlement agent must, before disbursing funds, get the buyer's written statement that the buyer was told an owner's title policy, with affirmative mechanics' lien coverage if available, may be wanted. The notice must add that the value of later improvements may not be covered. That duty is written for residential real property, not for land generally, and whether a particular purchase falls inside it is a question for the settlement agent or an attorney.
The second is a first-page statement. Under Va. Code 17.1-223, a deed conveying residential property of not more than four dwelling units states on its first page the name of the title insurance underwriter, or that the existence of title insurance is unknown to the preparer. It is a rule about what the deed says, not a requirement to buy a policy.
So on a purchase of bare land, the paperwork may never raise the question of an owner's policy for you. The decision is still there, and it is easier to make before the settlement date than at the table.
The search behind the policy, the premium, and who pays it
A policy rests on a reading of the public record, and its price is set by the insurer rather than by the state.
The SCC's guide says buyers should have a title search performed, and whatever that search turns up is what the title side of the closing then has to deal with.
- Rates. The insurer sets the rate, and premium amounts come from the insurer or the settlement agent.
- Who pays. The guide leaves that to local practice, and the premium is one line among the closing costs a Virginia buyer and seller divide.
- Borrowing. A lender's loan policy comes with a loan. Whether a lender will finance a particular tract at all is a separate question, taken up in whether you can buy land with a regular mortgage.
Which questions go to the insurer, the settlement agent or the SCC
Title insurance decisions are made with papers most buyers see only once, so it helps to know in advance who can answer what.
The policy terms
What a specific policy excludes, what it lists as exceptions, and what the premium will be.The closing file
Which policies are being written for this purchase, the amounts, and how the premium appears on the statement.Consumer questions
The Bureau of Insurance's Consumer Services Section takes title insurance questions at 1-877-310-6560.About to put a vacant tract under contract, and unsure what the title side involves?
Send the county and the tract's location. Lowell will walk through what gets asked about title before closing on land and who answers each part. No cost, no obligation.
Got it. Thank you.
We'll be in touch shortly with an honest read.
Questions this raises
Does an owner's title policy carry over to the next buyer when I sell?
No. The SCC's Virginia title insurance guide says the owner's policy stays in effect as long as you or your heirs have an ownership in the property, and it cannot be transferred to the new owner when you sell. A buyer who wants an owner's policy on the land purchases a policy in the buyer's own name.
Is the loan policy the lender requires any protection for me as the buyer?
The SCC's guide says the lender is the named insured on the loan policy, which the guide says the lender needs only for the amount of the loan, and whose coverage ends when the mortgage is paid in full. The owner's policy is the one that names the buyer. What either policy covers in a given purchase is in its own terms, available from the title insurer or settlement agent.
Will title insurance cover a boundary problem found after closing?
It depends on the policy's terms. Title insurance covers losses from covered problems that existed before the insured took title, and it does not cover losses listed under the policy's exclusions and exceptions. Whether a survey-related matter is excepted in a particular policy is a question for the title insurer, and where a line actually runs is a land surveyor's determination.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Virginia Title Insurance Guide State Corporation Commission, Bureau of Insurance
- Va. Code 38.2-123, title insurance defined Virginia General Assembly
- Va. Code 38.2-4616, owner's title insurance notice in residential transactions Virginia General Assembly
- Va. Code 17.1-223, requirements for writings admitted to record Virginia General Assembly