Underwriting Q & A | What is the correct premium charge for amending the survey exception in an OTP versus issuing the T19.1 endorsement?

Q: What is the correct premium charge for amending the survey exception in an OTP versus issuing the T19.1 endorsement?

A: The premium calculation for each of these coverages is very different, and in cases where both coverages are requested, the premium calculation is intertwined.

The key to understanding the premium charge for “Amendment of Exceptions to Area and Boundaries” (sometimes referred to as “P-2 Coverage”, “the survey amendment”, and “survey coverage”) is to understand that the premium is based on the type of policy being issued not the type of property:

• If a T-1 policy is being issued the premium charge for P-2 coverage is 15% of the basic rate.
• If a T-1R policy is being issue the premium charge for P-2 coverage is 5% of the basic rate.

How do you know what policy to issue? P-38 states “A Company shall only issue a Residential Owner Policy of Title Insurance-One-to-Four Family Residences (Form T-1R) on property that is Residential Real Property, and the insured is a natural person(s) at the date the policy is issued.  In all other cases, the Company shall issue the Owner Policy (Form T-1) when issuing a policy to an owner.”

It is important to understand the while the subject property may be residential real property, if the proposed Owner is not a “natural person” (for instance, a business entity), you will be issuing a T-1 policy and the premium charge for P-2 coverage would be 15% of the base premium—again, the premium charge being based on the type of policy not the type of property.

Conversely, the premium charge for issuance of the T19.1 is tied to the type of property and, if issued in addition to P-2 coverage, the premium charge is reduced.

R-29 states that if issued on residential real property, the premium charge for T19.1 shall be 10% of the basic premium, or 5% of the basic rate if issued in addition to P-2 coverage. However, if T19.1 is issued on land which is not residential property, the premium charge shall be 15% of the basic premium or 10% if issued in addition to P-2 coverage.

To summarize:

• Amending the survey exception under P-2 is based on the type of policy issued not the type of property;
• The type of policy being issued (T-1 v. T1-R) is not solely based on the type of property but also the nature of the proposed owner (natural person v. non-natural person);
• The premium charge for issuance of the T-19.1 endorsement is based solely on the type of property but is reduced if issued in addition to amendment of the survey exception under P-2.