What does an exception in a title insurance policy mean?

In the context of a title insurance policy, an exception refers to specific risks or conditions that the policy does not cover. When a title insurance policy is issued, it typically includes various exceptions that outline what is excluded from coverage. These exceptions might pertain to issues such as easements, encroachments, or liens that could affect the property but are not insured against by the policy.

Understanding these exceptions is crucial for both buyers and lenders, as they highlight potential legal or financial challenges that could arise concerning the title. For instance, if there’s an existing easement allowing a neighbor to access a portion of the property, the title insurance will specify this as an exception, meaning the insurer will not cover any disputes or issues arising from that easement.

This distinction helps protect the insurer from liabilities associated with known risks while also informing policyholders about important factors that could impact their ownership or use of the property. Therefore, recognizing what is explicitly excluded from coverage is vital for making informed real estate decisions.