Many home buyers feel overwhelmed by the process of purchasing a home, and thoughts of home security over the long term are pushed for later. You likely have already prepared with homeowner’s insurance, but title insurance is another important coverage to consider when purchasing a home. Be sure to learn more about what owner’s title insurance can do to protect your investment before you close. Here is what you need to know:
What Is The Difference: Owner’s vs. Lender’s Policy:
If you are already aware of title insurance, it may be because you see it as a line item that you are paying for during closing. Be sure to carefully read all of your purchase documents; they may include a section requiring you to purchase title insurance. Most often, you will be required to pay for a lender’s title insurance policy as part of closing, but this policy does not cover you as the homeowner.
The line item you typically see for title insurance protects your lender who requires you to pay for title insurance coverage on their behalf. This protects their investment in you and your home. However, if you want your own coverage, you will need to secure a separate owner’s policy in your name, not the lender’s.
Some buyers are able to negotiate the cost of this policy into the purchase agreement with the seller, but the seller is under no obligation to offer this as an incentive. As a buyer, you may be responsible for this process yourself. Title insurance cannot be transferred from the seller to the buyer; if you want this type of protection you will need to secure your own policy.
Most Common Owner’s Title Insurance Coverages
A title insurance policy bolsters the protection already provided by homeowner’s insurance for a very affordable price, and it lasts for as long as you own the home. Title insurance covers defects and issues with the title of your home. This document tracks who has owned the property, how and when it has changed hands and whether any legal action has been taken.
For example, if a previous owner failed to pay their property taxes, a lien may have been placed on their property demanding them to pay the amount due. If you purchase the property without being aware of the lien, or if the lien is discovered after you buy, you are responsible for paying this debt, even though you had no part in creating it. Title insurance protects against this and other similar events, preventing you from being financially responsible for a mistake or omission in the home’s history.
Similarly, title insurance usually covers formerly undisclosed heirs, fraud and forgery that could threaten your ownership of the property. Without title insurance, you would have to pay legal fees to contest these claims and could even lose the home, as well as any equity you put into it.
Areas Not Usually Covered
Title insurance is flexible; therefore, an experienced provider can craft a policy that is right for you. Physical Issues with the property discovered after you purchase, some of which may require major repairs, are not covered under this type of policy. It also does not protect your home against physical damage; these types of problems are resolved under homeowner’s insurance. Many title insurance policies will not cover you against zoning issues or border disputes unless you pay for these services or purchase an upgraded policy. Be sure to read all of the documentation to understand what is covered and what is not before you sign.
Calculating The Cost Of Title Insurance
Title insurance is generally affordable because it is priced at a percentage of your home’s value. Most people will pay about $1000 on average, but that cost can vary depending on the sales price of your home. However, unlike other types of insurance in which you pay a monthly premium for the life of the policy, title insurance is a one-time fee. Coverage is paid by a single lump sum and provides protection as long as you own the home.
Trust The Pros To Help You Create The Right Title Insurance Policy For Your Needs
If you are ready to purchase title insurance for your new home, be sure to work with experts who will design a policy containing the right coverages for your property. The professionals at Mathis Title Company would be happy to help you understand your title insurance options and select what is right for you. Contact our experienced team to schedule an appointment today.