Title Insurance Policies
A homeowner’s guide to understanding your options.
When you buy a house, you're buying more than the structure and the property it sits on. You are also buying its history, not only the prior owner’s history, but its legal history as well, as it is identified in the title. If there's a problem with the title that was never uncovered during the closing, such as a lien on the property, that problem is now yours.
Title insurance protects you against loss resulting from matters affecting title to real property. Title insurance companies evaluate the history of the property and insure that nothing in the history of the title will result in a loss to the insured. Unlike other forms of insurance, title insurance is paid for by a single, one-time premium at the time the property is acquired.
Most mortgage lenders require people to purchase a title insurance policy in the lender's name. That policy is called the Mortgagee Title Insurance Policy and it is required to insure the validity of the mortgage as a lien on your property. But the policy you buy for the lender does not protect you. Owners desiring title protection must purchase a separate policy insuring their interests. The title insurance policy you buy for yourself is the Owner Title Insurance Policy.
The standard Owner Title Insurance Policy in use today was created by ALTA, the American Land Title Association, in 1992. It provides basic coverage for those who want to protect their interest in the property they purchase. The amount for your Owner Title Insurance Policy is usually higher than what you'd pay for a Mortgagee Title Insurance Policy because of the risk involved — Owner Title Insurance covers the entire value of your property as opposed to the value of just the loan or mortgage. Specifically, it insures that:
- You are the true, legally recognized owner of the property.
- There are no defects, liens, or encumbrances other than those that have been identified and listed in the title insurance policy.
- You can sell your home to another buyer with insurable title, if the buyer will accept insurable title, without a problem with the title.
- You have a legal right to access your property from a public street — or a privately owned point of access.
- If your title is challenged legally, it will be defended legally. And all costs, attorneys' fees, and expenses associated with that defense will be covered by the insurer.
- The dollar amount of your coverage will automatically increase 10% each year for the first five years of its life up to 150% of the original title insurance policy — without any additional cost to you.
The Owner Title Insurance Policy provides coverage not just for the time you own the property, but for as long as you might be liable to any future owner. If a new owner makes a legal claim against you within the coverage of your title insurance policy, you'd be covered for the same protections listed above.
That's an overview of the Standard Owner’s Title Insurance Policy. But because owning real estate can expose you to a large range of legal issues, an Expanded Owner Title Insurance Policy is available as well.
Having an Expanded Owner Title Insurance Policy means you — or your trustee — are protected in additional areas where you may be vulnerable. It insures everything outlined in the Standard Owner Title Insurance Policy, plus insuring that:
- You can use the land for a single-family dwelling.
- There are no pre-existing leases, contracts, or purchase options that can affect your title nor easements affecting your property. Also there arc no pre-existing violations of any recorded restrictions that may affect your property.
- There are no valid liens against your property for work or materials that were provided before your purchase.
- You won't lose title to your property because of a preexisting violation of restrictions that you were unaware of.
- No one can force you to remove an existing structure on the property because of a zoning violation, a private restriction, or lack of a building permit for the structure.
- You can legally access the property by foot and by vehicle.
Specifically, it covers against loss from:
- Anyone who makes an ownership claim based on title forgery, before or after you acquired the title.
- Any legal challenges to your ownership because of pre-existing violations of a restriction regarding how the land is used.
- Legal claims to limit your use of the property based on a recorded restriction.
- A person building on your property (e.g., encroachment) without legal permission.
- Refusal to fulfill a purchase agreement or lease, or to make a mortgage loan because of any violation of a restriction prior to when you bought the property.
- Inability to sell your property because of violations of subdivision regulations.
The issues outlined on this webpage explain why title insurance is important from a legal standpoint. But there's another, equally important reason for purchasing a title insurance policy: peace of mind. With title insurance you can feel secure, knowing that you're protected from unforeseen circumstances.