Purchasing a home is an exciting life event. It is also one that involves a significant financial investment. As such, most people purchase a homeowner’s policy to protect against damage to the dwelling’s structure or that which may occur from natural disasters, fires, or other events. But what a homeowner’s policy does not cover are intangible threats to the property, such as unpaid liens, boundary disputes, or other title defects that may arise after closing on the home loan.

Owner’s title insurance is an indemnity policy that helps protect a homeowner’s financial interest in the event title issues are discovered after closing. Purchasing an owner’s policy is optional but strongly recommended. Read on to learn some of the key benefits of owner’s title insurance.

How does owner’s title insurance work?

During the settlement process, a title search is conducted to identify any title defects, which are essentially ownership or financial claims another party may have over the property in question. While the goal of a title search is to detect any defects, there are times when undiscovered title issues surface months or years after the property is purchased. Such instances could lead to financial loss, legal fees, and even the loss of the property. An owner’s policy can help mitigate these risks and help protect the homeowner from sustaining a significant financial loss.

Why purchase owner’s title insurance?

Having an owner’s title insurance policy in place can offer the homeowner a number of key benefits should title defects arise after settlement. Some of the key benefits of title insurance include:

–Protect against financial loss: Should another party prove to have a legitimate claim on a homeowner’s property, an owner’s policy would reimburse the financial loss for covered title defects up to the policy amount.

–Help cover legal fees: At times, it may be necessary for a homeowner to defend their rights to their property in a court of law. Owner’s insurance can help cover court costs and additional legal expenses.

–Provide peace of mind: For a homeowner, knowing that a policy is in place to help against financial loss from potential title defects can bring peace of mind to the home buying process.

How long does an owner’s policy last?

An owner’s title insurance policy will remain in effect as long as the homeowner or their heirs own the property, even if the loan is refinanced at some point. It is important to understand that an owner’s title insurance policy will only apply to title defects discovered after the loan has closed on the property in question, or only those impacting the ownership chain before the homeowner took possession.

Even when the title of a property is rendered free and clear following a title search, this is still the risk that title defects could be identified months or years after closing. To learn more about protecting your homeownership interests with an owner’s title insurance policy, please contact Linear Title & Escrow today.