Appreciating Home Owner’s Title Insurance

Posted on December 11, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

Matters Covered and Not Covered by Title Insurance

By Staff Reporters

During the current housing market implosion it is prudent to understand that home owner’s title insurance enables the buyer of real property to take clear title of the purchased property. That means there are no outstanding liens in existence and no one has a prior claim to said property.

Covered Items

In general, items that are covered by title insurance can be determined solely from review of the property records and court records:

  • Judgments
  • Liens (Except to the extent that they have superiority, i.e., once recorded, they gain a priority ahead of things recorded prior to the lien, for example, mechanic’s liens.)
  • Deeds of trust, mortgages, and real estate contracts
  • Easements
  • Restrictive covenants
  • Rights granted in real property by divorce degree (right to half proceeds of sale of property)
  • Mineral rights reserved by prior owner or granted to a third party
  • Recorded leases
  • Latecomer’s agreements
  • Recorded no-contest agreements (agreement not to contest future imposition of taxes or assessments, usually for things like traffic, water, and sewer mitigation)
  • Deeds transferring ownership of any interests in the property
  • Whether the property has access to a public road
  • Taxes and recorded assessments
  • Condemnation actions filed with the court or property records.

Not-Covered Items

Generally, items that are not covered by title insurance cannot be determined by reviewing the property records and court records:

  • Zoning laws, restrictions on the use of property
  • Building codes, setbacks, lot coverage, construction standards
  • Wetlands regulations
  • Storm water drainage permits
  • Flood plain, location of property in relation to flood plain
  • Unrecorded leases
  • Use permits
  • Hazardous materials, environmental contaminants
  • Subdivision regulations
  • Shoreline Management Act
  • State Environmental Policy Act (SEPA)
  • Persons claiming an interest in the property, through adverse possession (both ownership of the property and easement rights)
  • Compliance of the property with recorded restrictive covenants.

Additional Extended Coverage Policy Items

Coverage extends beyond basic coverage. This covers items that show up during an inspection of the property:

  • Additional matters include those that the title company can determine from either an inspection of the property or a review of a survey showing all improvements to the property and the location of all easements.
  • Mechanic’s liens filed after the date of the policy, but that take priority prior to the date of the policy
  • Encroachments (the buildings on the property that overlap the property lines or buildings on adjacent property that overlap onto the client’s property)
  • Persons claiming an interest in the property through adverse possession (both ownership of the property and easement rights).

Additional Matters Covered by Endorsement

  • Compliance with subdivision laws (Guarantees that the property constitutes one or more legal lots)
  • Zoning laws.

Assessment

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Understanding Automobile Insurance

Posted on May 7, 2009 by Dr. David Edward Marcinko MBA MEd CMP™

A Review for Physicians

By Gary A Cook; MSFS, CLU, ChFC, RHU, CFP® CMP™ (Hon)

insurance-book7

Like the Home Owners policy, automobile insurance comes in a package (commonly called a Personal Auto Policy, or PAP) containing declarations, forms and endorsements.

These are: Liability Coverage, Medical Payments coverage, Uninsured Motorist coverage, and Coverage for Damage to your auto.

Important Elements

The important elements of automobile coverage are:

  • The vehicle or vehicles is covered, whether owned or leased
  • The insured – the covered driver
  • What is covered?
  • What are the limits of coverage – for both property and liability?

Exclusions

What are the exclusions – for example, the business use of a vehicle may not be covered under the personal policy? Other coverage for example includes a friend driving your car, or, coverage driving a rental vehicle. The medical payments coverage outlines the limits of liability for medical services needed as the result of an accident.

PULP

The final area of common personal coverages is the Personal Umbrella Liability Policy. To say that our society has become very litigious may be a gross understatement. The umbrella liability policy transfers the risk of losing substantial assets or future personal income to pay legal obligations resulting from an adverse judgment. The umbrella policy originated to provide risk protection against catastrophic legal claims or judgments. Typically, coverage limits begin at $1 million with upper limits of $10 million, and some unique situations, more. The term “umbrella” arises from the contract language that reflects that the individual carries the appropriate underlying basic coverages (homeowners or automobile) and that this coverage is triggered after the limits of the base contracts are exhausted.

Provided Coverage

An important element of this policy is that coverage provides for protection for the named insured, spouse, and family members living in the household.  This coverage should be very important to those households with teenage drivers.  Organizations may also obtain the protection of an umbrella policy, with certain limitations and exclusions. Unfortunately, “failure to render proper professional services” is very frequently a common exclusion, though some insurance companies will cover this loss exposure with an increased premium.

biz-book2

Other Policies

Other common policies available include: Watercraft and Airplane coverage, Title Insurance, Flood Insurance (offered by very few private insurance companies), Renters Insurance (which covers the contents), and Condominium protection (like homeowners, but has language for common wall risks).

Personal Legal Expense Protection

Finally, there is the issue of the taxation of premiums and claim payments. Premiums for personal property and casualty coverage are not deductible. Therefore, only under unusual circumstances will any benefits received from the coverage be considered taxable income.

fp-book2

Assessment

However, the benefit payments may be considered capital gain if they happen to exceed the insured’s basis in the property. Uninsured losses are generally deductible under the current Internal Revenue Code.

As usual, specific questions concerning the taxation of premiums or benefits should be directed to your professional advisors.

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