You are buying a home. I feel it is one of the greatest achievements a person can accomplish. During the process many clients always ask me, "Do I need Title Insurance?" Think of it this way, do you need health care coverage? Title insurance is a one time charge, at closing, to protect your home.
When someone is buying a home an attorney or title company will complete a title search and evaluation of the title. This means that they are looking to see if there is anything on the title of that property. There are two types of title:
- Clear Title - means that nothing is on the title
- Marketable Title - means that there is something on the title but there is documentation that shows the issue has been cleared up.
What is title insurance?
There are two types of Title Insurance - lenders and owners title insurance. They generally do the same thing, but for each party. Title insurance protects the lender and owner from any future problems with the title.
Common Title Issues
Very rarely do you see title issues after the closing, but it does happen on occasion. Some typical title issues that a homeowner might see:
- A previous owner did not disclose that the property was used as collateral for an unpaid loan
- Failure to pay real estate taxes
- Fraudulent claim from someone else who said they were the owner
Standard or Enhanced Title Insurance
Standard title insurance
A standard title insurance policy covers an owner against matters of public records and with certain problems with deed.
- Someone else owns an interest in your title
- Someone else has an easement on your land
- Improperly executed, delivered or recorded documents
- Forgery, fraud, duress, incompetence, incapacity or impersonation
- Defective recording of document
- A lien on your title because of a deed of trust, judgment, tax lien, special assessment or homeowners association charge
Enhanced title insurance policy
Covers everything in the standard title insurance policy and much more. There is some post policy coverage as well. Some of the items covered in an enhanced policy are:
- Forced correction or removal of any structures due to restrictive covenant violations
- Unrecorded easements
- Reversion or forfeiture of title due to restrictive covenant violations
- Damage to existing improvements, including landscaping, due to exercise of existing mineral rights.
- Post Policy inflation coverage up to 150% of the original policy
- Post Policy coverage extends to Living Trust beneficiaries and trustees
I have attached a document that shows the Standard vs. Enhanced title coverage. Each title company is different but they generally cover the same things. If you are not sure what type of coverage you have, look at the title policy you received at closing and call them. They will be able to tell you which one it is. You can always change to an enhanced title policy if you do not have one. If you decide to do that, you might have to have a new title search performed before they change the policy.