The usual form of title insurance policy contains four parts:

1. Agreement of insurance.

2. A schedule describing the subject matter of insurance.

3. A schedule of exceptions.

4. Conditions of the policy.

The agreement of insurance usually states substantially that the company "in consideration of the payment of its charges for the examination of this title to it paid doth hereby insure and covenant that it will keep harmless and indemnify..........

(hereinafter termed the assured) and all other persons to whom this policy may be transferred with the assent of this company, testified by the signature of the proper officer of this company, endorsed on this policy, against all loss or damage not exceeding..........dollars which the said assured shall sustain by reason of defects, or unmarketability of the title of the assured to the estate, mortgage or interest described in Schedule 'A' hereto annexed, or because of liens or encumbrances charging the same at the date of this policy. EXCEPTING judgments against the assured and estates, defects, objections, liens or encumbrances created by the act or with the privity of the assured, or mentioned in Schedule 'B' or excepted by the conditions of this policy hereto annexed and hereby incorporated into this contract, THE LOSS and the amount to be ascertained in the manner provided in the annexed conditions and to be payable upon compliance by the assured with the stipulations of said conditions and not otherwise." This agreement is dated and executed by the proper officers of the company under its corporate seal.

The company's charge is a fixed rate based usually on the amount of insurance named. Unlike other insurance it is a flat fee, paid but once. Customarily the company insists that the property be insured for at least its full value. And the insured also should want this, as the company is in no case obligated to pay more than the amount set forth in the policy. The insured may if he contemplate improving the property, have his title insured for a greater sum than its value at the time of transfer. The date of the policy is very important. The company insures only against loss to the insured arising from some defect at or prior to the date of the policy. The insured should insist that the policy be dated at or after the time title is closed. The policy being issued under seal the time to sue upon it does not begin to run until a loss is sustained. The statute of limitations may be twenty years. The loss might not occur till fifteen years after the policy were issued. In such case the right to sue on the policy would not expire till thirty-five years after the policy's date.

The schedule describing the subject matter of insurance usually follows the agreement of insurance. It is divided into three parts. First it states the estate or title of the insured. Second is a brief description of the instrument under which the insured acquired his estate or interest. Third is a description of the premises covered by the policy. This description should be sufficiently detailed so that the property may be easily identified. The policy covers not only the land but all buildings and fixtures thereon. It does not cover personalty The insured should see to it that the description is clear.

The schedule of exceptions is practically the most important part of the policy. It sets forth a detailed list of all encumbrances and defects against which the company does not insure. Any loss arising from any of these exceptions is not covered by the policy. The insured should insist that only such encumbrances as he has agreed to be inserted. Much trouble has arisen on this point, and many companies insist before closing of title, that the insured consent in writing to such objections to the title as have not been removed. Nearly all companies refuse to insure against the rights of tenants and persons in possession of the property. Hence this exception usually appears. All encumbering facts shown by a survey are excepted, or if there be no survey, the policy will except "any state of facts an accurate survey may show."

The last part of the policy is a statement of the conditions of the policy. These conditions are seldom read but are very important. They specify the terms of the company's liability and the relations between the company and the insured. First it is stipulated that the company will at its own cost defend the insured in all actions founded on a claim of title or encumbrance prior to the date of the policy and thereby insured against. This not only assures the insured against loss but saves him the inconvenience and expense of litigation.

Should the insured contract to sell the property and the purchaser reject the title for some defect not excepted in the policy, the company reserves the option of either paying the loss or maintaining at its own expense an action to test the validity of the defect. In such a case the company is not liable under the policy until the termination of the litigation.

If the policy is issued to a mortgagee, the company's responsibility arises only in the event that upon foreclosure the mortgage is adjudged to be a lien upon the property of an inferior quality to that described in the policy, or the purchaser at the foreclosure sale is relieved by the court of completing his purchase by reason of some defect not excepted in the policy.

The conditions of the policy also provide for arbitration in certain cases of disputes as to the validity of objections to the title insured. The policy covers the insured even after he has sold the property, if he be sued upon the covenants in his deed.

The policy is not transferable, except that if it insures a mortgagee and he sells the mortgage, his rights under the policy may be passed to his assignee. But even then the company's consent must be obtained.

Should there be a loss under the policy, the company, having settled the claim, acquires all the rights and claims of the insured against any other person who is responsible for the loss. This is based upon the legal doctrine of subrogation. The title company may be able to collect all or part of the loss from the person who caused the loss.

In any case where the company has paid a loss totalling the amount of the policy, it reserves the right to take over the property from the insured at a fair valuation. There is a very good reason for this provision. In some instances the title is defective, but can with time and effort be cured. The company in such an event pays the fair value to the insured, receiving a deed from him. It then owns the property, and at its pleasure can take such action as may be necessary to remove the defects in the title.