Benefits of Owners Title Insurance

WHY OWNER’S TITLE INSURANCE?

The Loan Policy only protects the Lender’s interest, it does not protect the buyer’s interest in the property. The lender requires that they be provided with a lender’s title insurance policy (Loan Policy) to protect their interest in your property up to the amount of the mortgage. While the premium for the Loan Policy is included in your closing costs, it does not protect you. Your ownership interests are insured only by an owner’s title insurance policy (Owner’s Policy).

The Owner’s Policy remains in effect for as long as you and your heirs own the property. While the lender’s coverage under the Loan Policy decreases as the mortgage is paid down and terminates when the final payment is made, the Owner’s Policy remains in full effect for as long as you and your heirs own the property. It is the best protection against potential title defects that could deprive you of your ownership rights. In the event of a claim, your title insurance company will either correct covered title problems, defend against a lawsuit attacking your title as insured, or reimburse you for insured losses up to the amount of the policy.

The Owner’s Policy is available for a one-time premium and at a discounted rate if purchased simultaneously with the Loan Policy at the time of closing. The additional premium is usually equal to a couple of hours of an Attorney’s billable time to review the matter if a dispute arises as to the title.

Although the attorney is doing a meticulous search of public records, there are matters out of their control which could affect the title. Just a few examples of these matters are:

an error by a clerk in the county recorder’s office;
a misapplied tax payment;
forged documents;
unknown creditors;
undischarged prior owner mortgages;

The Owner’s Policy can help you when you want to sell or refinance your property. Potential buyers or lenders may refuse to purchase or refinance your property if they believe the title is unmarketable. The Owner’s Policy insures against loss or damage that you may suffer as a consequence of the marketability issue and your title insurance company may enable the sale or financing to go through by offering to insure the buyer or lender against any title defects that may exist.

ENHANCED HOMEWONERS POLICY V. STANDARD POLICY

Better Coverage. The Homeowners Policy goes beyond the standard title insurance and offers coverage for matters not traditionally covered by Owners title insurance – 29 coverages as opposed to 10.

Minimal Increase in Cost. The difference in cost is only 10% above a standard ALTA Policy

Plain English. Finally, an insurance policy that you can read and actually understand!

The Homeowner’s Policy has “automatic inflation” coverage which increases the coverage of the policy up to an additional 50% if the property’s value increases. The policy will automatically increase by 10% of the liability shown on the policy on each of the first five anniversaries of the policy date

Although the attorney is doing a meticulous search of public records, there are matters out of their control which could affect the title. Just a few examples of these matters are:

Post-policy encroachments;
tax payments assessed for new construction for time period before purchase but assessed post-policy;
identity theft;
Insured’s own undischarged mortgages;
Mechanic’s Lien coverage;
Building permit violation;
Subdivision violation;
Restrictive covenant violation (even if excepted on Schedule B);
Zoning violation

20 Common Title Problems

Creditor Claims
Deeds executed under false or expired powers of attorney
Mistaken interpretation of wills and trusts
Incorrect representation of marital status
Undisclosed or missing heirs
Mistakes in recording legal documents
Incorrect legal descriptions
Forged deeds, discharges
Federal, State inheritance and gift tax liens
Errors in tax records
Discovery of later will after probate of first will
Unsatisfied claims not shown on the record
Confusion due to similar or identical names
Heirs born after the execution of the will
Incorrect indexing of land records
Clerical errors in recording legal documents
Easements of prescription not discovered by a survey
Undue influence of a grantor of a deed
Non-delivery of deeds
Deeds from minors or non-existent entities

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