Interest rates are edging up and you’ve decided to buy a home. There are so many costs: down payment, prepaid taxes and interest, title insurance. Wait a minute – title insurance is something your lender requires, and that’s all you need, right?
When you think of getting only the lender-required title insurance policy, think again. You’re the homeowner, you deserve an owner’s title policy.
Why a lender requires title insurance
A lender requires several types of insurance to protect its financial investment in the mortgage on your property.
It requires homeowner’s insurance to protect the home’s structure against loss from fire or wind damage. If you’re in the flood plain, a lender requires flood insurance. Those on the coast and subject to hurricanes must have wind hazard insurance. Lenders also require title insurance to ensure the validity and priority of their investment, whether it keeps the loan itself or sells it in the secondary marketplace.
But a lender doesn’t care about the contents of your home. So you also purchase homeowner’s insurance to cover your personal contents – such as the new furniture you may have just bought.
Just as with homeowner’s insurance, unless you have an owner’s title policy, you run the risk of leaving your financial investment in the property in the lurch.
What an owner’s title policy covers
As an owner, you expect to enjoy your property within the bounds of the laws and restrictions that govern its use.
If you want to build a pool or a new family room, you want to know about any easements that govern where in your yard you can place the improvement or how large it can be. You want to be able to sell your home when you’re ready to move, without complications to the property’s title.
You also want to be protected against any fraud, forgery or undisclosed liens that could come back to haunt you. Because even with the complete title search and examination a title company does for the lender’s coverage, hidden title hazards can affect your financial security. Without an owner’s policy, you wouldn’t be covered.
Here’s an example: A couple bought a home from a woman and her daughter after the death of the woman’s husband. The husband had died without leaving a will.
Soon after the sale, the son of the late owner by a former marriage came forward and said he was entitled to his share of the home. This situation could have meant an expensive problem for the couple who had purchased the home.
Fortunately, the couple had purchased an owner’s title insurance policy, and the title underwriter stepped forward and paid off the son’s claim to the property. Without the owner’s policy, the buyers would have had to pay legal fees to resolve the issue – as well as the amount paid to the missing heir.
It’s so easy. Just like a lender’s policy, owner’s title insurance is purchased by a one-time premium paid at closing. One payment, and your financial investment in your home is protected as long as you the policyholder (or your heirs) have an interest in the insured property.
And depending on how you transfer the property to new purchasers, your owner’s policy may protect you even after you’ve sold the property.
Yes, it is an extra expense. But just as you decide to cover your property’s contents, you should decide to cover the financial investment in your property.
You’re the owner. You deserve an owner’s title policy.