Owner’s Title Insurance: Standard vs. Enhanced Policies

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.

Similarities 

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)

Differences

Enhanced policies offer more extensive coverage, including title defects such as:

-Property encroachments

-Subdivision and zoning violations

-Damages resulting from the use of easements

-Restrictive covenant violations (existing)

-Post-policy forgeries

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!

5 Common Questions About Title Insurance

Whether you’re new to the homebuying process, or even a seasoned buyer, you likely have several questions about title insurance and how it works. Title insurance is an indemnity policy protecting mortgage lenders and homeowners against monetary loss if post-settlement title defects surface or the loan is deemed unenforceable. Read on to explore some of the most commonly asked questions and answers surrounding the topic of title insurance.

Lender’s vs. Owner’s Title Insurance

Before delving further into these FAQs, it important to understand that there are two forms of title insurance: lender’s vs. owner’s. While lender’s title insurance guards the economic stake of the loan or mortgage company, an owner’s policy protects the homebuyer’s ownership rights and financial interests in the property. For more in-depth information, please visit our Title Insurance page.

FAQs About Title Insurance

Title insurance is integral to the homebuying process for many individuals. To help you understand more about this topic, we have listed five commonly asked questions and associated answers about title insurance:

What Is Covered by Title Insurance?

An owner’s title insurance policy covers court costs or other legal fees incurred should you need to defend your property rights. This may include protection against someone making an ownership claim to your property or other types of title defects. A lender’s policy covers the monetary investment made by mortgage lender if a title defect or other event renders the loan invalid. 

Are Title Insurance Policies Required?

Mortgage lenders almost always require homebuyers to obtain a lender’s policy as part of the home loan process. While purchasing an owner’s policy is entirely up to the buyer, this form of title insurance coverage is highly recommended. 

How Are Title Insurance Costs and Coverage Amounts Determined?

The cost and coverage amounts for owner’s title insurance policies are determined according to the selling price of the property, while lender’s policies are dependent upon the amount of the home loan.

Who Covers the Cost of Title Insurance?

A lender’s title insurance policy is the financial responsibility of the homebuyer. The homebuyer also cover’s the cost of an owner’s policy; however, a portion of this amount may be negotiated within seller concessions, if applicable. 

Do I Need a New Title Insurance Policy If I Refinance My Loan?

An owner’s policy will be effectual for as long as the property remains in your legal possession. Mortgage lenders will require you to purchase a new policy if you decide to refinance your loan, but this may be offered at a discounted rate. 

For assistance in navigating the homebuying process and understanding how title insurance applies to your real estate transaction, please contact Linear Title and Escrow today.