Purchasing a home is among the biggest investments that a person will make in their lifetime. After spending months searching for the perfect location, possibly signing a mortgage for a significant amount of money, and starting a life in a new home, homeowners can agree that they have committed a lot to their property. Protecting an investment of this size is intuitive. Homeowners insurance is required with most mortgages, and special insurances like flood or windstorm are a given in certain areas. We know that we need to protect our home against things to come, but what about things that have already happened? This is where Owner’s Title Insurance comes into play.
About Owner’s Title Insurance
Owner’s Title Insurance protects the financial investment made when purchasing a home. At closing, the homebuyer acquires the title, or deed, to the property. With that title comes the right to occupy the property, but also the history that comes along with it. This means that anything concerning the property’s title, or a previous owner’s outstanding claims, is now assumed by the new homeowner. Owner’s Title Insurance relieves this burden by protecting the homeowner against loss due to these pre-existing hazards or defects within the title for as long as the homeowner, or his or her heirs, have an interest in the property.
How Much Owner’s Title Insurance Costs
If the homebuyer is lending any money for the home’s purchase, such as a mortgage, it is likely that the lender has required Lender’s Title Insurance. This type of title insurance protects the lender for the amount of its loan, and the cost of this insurance is dependent upon the loan sum. Lender’s Title Insurance does not protect the homeowner.
Owner’s Title Insurance is separate, and can be purchased to cover the homeowner’s interest in the property. The cost of this is calculated based on the purchase price of the home, covering the homeowner for as long as he or she holds an interest in the title to the home. The coverage automatically continues for the benefit of the homeowner’s heirs as well. Unlike other types of insurance, Owner’s Title Insurance is a one-time expense. It is mainly intended to cover a detailed title search that the insurance company will complete prior to closing to prevent issues down the road.
Situations Where Owner’s Title Insurance Can Help
Here are some situations where Owner’s Title Insurance will have you covered:
- The deed, mortgage, trust or other related document was forged;
- The deed was signed by mistake or given under fraud;
- The public record may have errors;
- An unknown heir of the property presents a claim of ownership;
- An estranged spouse of the previous owner did not sign off on the home sale;
- The discovery of a will is made that affects property ownership.
Having Owner’s Title Insurance enables the homeowner to submit a claim to their insurance company when endless possibilities of pre-existing home title issues surface. The insurance company will then absorb the legal costs of disputing the claim, as well as the costs to resolve the issue, if necessary. In the absence of Owner’s Title Insurance, the homeowner can lose the money that has been invested into their home, as well as the associated legal costs.
For an additional premium, expanded title coverage may be purchased; covered matters include:
- Post-policy forgery
- Post-policy encroachments by neighbors
- Post-policy adverse possession
- Building permit and zoning violations
- Subdivision violations
- Mechanics liens
To learn more about Owner’s Title Insurance in your state, contact our real estate law professionals.