Protecting your real estate investment against the risk of title defects is important, regardless of the age of the property. Title insurance is a type of indemnity policy that helps guard your financial interests and ownership stake should title defects be discovered after closing, giving another party plausible rights to your property. Most mortgage lenders mandate that homebuyers purchase a lender’s title insurance policy to protect the financial institution’s interests should the loan become unenforceable. Owner’s title insurance, however, is not required – but it is highly encouraged.
How Can Owner’s Title Insurance Protect Your Interests?
Purchased at the time of closing, owner’s title insurance can offer financial reimbursement should ownership claims by another party, such as an undiscovered heir, lead to the loss of your property. An owner’s policy may also cover the cost of litigation should you be required to defend your property rights in a court of law. There are two types of owner’s title insurance, known as standard and enhanced policy, that offer varying levels of coverage. Read on to learn more about the differences in these plans and how each might protect your financial and real estate interests.
What Is the Difference Between a Standard and Enhanced Owner’s Title Insurance Policy?
When purchasing owner’s title insurance, you have the option between a standard or enhanced policy. While both cover certain types of common title defects, an enhanced policy provides coverage for a wider range of title problems. It is essential to understand the similarities and differences in these plans to help you decide the best option for your personal needs.
Both of these policy types provide coverage for:
-Land rights (such as easements)
-Ownership rights (including liens or heirs)
-Lack of vehicular or pedestrian access (only legal access is covered with standard policies)
-Unmarketable title (resulting in an inability to obtain a loan or sell the property)
Enhanced policies offer more extensive coverage, including title defects such as:
-Subdivision and zoning violations
-Damages resulting from the use of easements
-Restrictive covenant violations (existing)
In addition, enhanced coverage increases 10% annually to reflect property value increases (up to 150%).
Additional Information About Owner’s Title Insurance
Owner’s title policy premiums are based on the sales price of the home and are paid at closing. In general, the difference in cost between standard and enhanced policies is typically only a few hundred dollars.
Your home may be one of your greatest financial assets. Having an owner’s title insurance policy in place can help bring you peace of mind, safeguard your property ownership rights, and mitigate the potential for financial loss. For more information on standard vs. enhanced title insurance policies, please get in touch with Linear Title & Escrow today!