The amount of insurance is usually the amount the insured paid for the property and this is the maximum that may be recovered. It is often appropriate that the insurance be for more than this amount, espec ially when the insured intends to add to the cost by ex penditures for improvements. The premium paid for the policy is a single premium paid once for all. It is based upon the amount of insurance, and is the same regardless of whether the title was a difficult or an easy one to examine.
10. Exceptions and limitations upon subject mat ter of insurance.—Every exception, encumbrance and limitation affecting the title insured should be clearly set forth in the schedule annexed for the pur pose. It is sometimes required, in closing the title, that the insured assent in writing to the items to be included under this schedule. When the policy is issued these items should be carefully examined by the insured, to make sure that they are the ones agreed upon.
Encroachments and other matters shown by a sur vey will be stated in this section of the policy, and if no survey has been furnished the policy will state that the company does not insure against such facts that an accurate survey would show.
11. Conditions of the important clause of the policy provides that the company will defend at its own expense, all actions or proceedings on mat ters insured against founded on a claim of title or encumbrance prior in date to the policy. Another important condition is that the title is not only good but that it is marketable. All proceedings are con ducted and defended by a title insurance company under its direction and at its expense, both as to coun sel fees and risk of costs. The insured is indemnified not only against actual loss but is saved from the an noyance incidental to litigation.
A policy of title insurance, unless it is issued to a mortgagee is not transferable. The agreement stip ulates that the insured shall be indemnified against loss. If he parts with his property and receives sat isfactory compensation for it, the company's guar antee of marketability has been performed. If the insured conveys the property by a warranty deed, and is afterward called upon to make good his warranty for a defect in the title, he can then obtain indemnity from the title company. The policy always protects the insured, but it is unreasonable to expect that it should be transferable.
When a mortgage is assigned, all securities and col lateral go with it, and for that reason a mortgage title policy is transferable upon the assent of the company.
In the event of loss, the title company has the op tion of either paying the loss or taking over the prop erty. If the loss is total and cannot be salvaged (as in the case of a forged deed) the company will pay the loss to the amount of its insurance. Very often time and skill will clear up a defective title. If the company sees a chance of recovery by clearing up the title, it will take over the property, paying the insured its full market value which may be much more than the amount of the insurance.
a company settles a claim, it acquires every right which the policyholder has against per sons who are liable to him by reason of the loss. If a company is held because a mortgage or tax has not been paid, and the insured has a full convenant and warranty deed, the company after paying the policy holder his loss, is entitled to sue the man who made the full convenant and warranty deed so that it may recoup the loss.
The policy of title insurance expressly provides that the insurance does not cover "defects and en cumbrances arising after the date of the policy." Everything that happens after that date is in the control of the policyholder.
12. Use of title title policy should be produced whenever the insured property is being sold or any agreement about it is being made. Care should be taken to make the contract or agreement with respect to the title exactly as it is insured, so that if there is any defect in title or marketability, the insured can fall back on the insurer. In order to be certain that this detail is observed, it is advisable to have the title insurance company prepare the con tract or agreement. The policy of title insurance necessarily stipulates that any untrue statement made by the applicant or policyholder leading the insurer to issue A policy will vitiate it.
13. Closing the ordinary contract of sale or exchange provides for payment of the pur chase price and delivery of the deed at a date shortly following. We will assume that in the interim the title has been searched for the purchaser.