Do I Need Owner’s Title Insurance When Buying A Home
Buying a home these days is fairly straightforward. You see the home you like, make an offer and then perhaps haggle a little before settling on a price. Once all the formalities are over, all the documents signed and the money paid, the home is yours. Or is it?
I don’t want to burst any bubbles, but are you sure the home is yours? Do you know its history? Was the seller really entitled to sell the home? Will an unknown heir arrive on your doorstop claiming their property? If there are problems down the track there is a risk of losing your home, and your money. This is where Owner’s Title Insurance may be your savior.
A basic owner’s policy will cover:
- Clear title to the property
- Incorrect signatures on documents
- Forgery, fraud
- Defective recordation
- Restrictive covenants
- Encumbrances or judgments
An extended Owner’s coverage can also be purchased. Depending on the insurance company, this could include:
- Building permit violations from previous owners
- Subdivision maps
- Covenant violations from previous owners
- Living trusts
- Structural damage from mineral extractions
- Encroachments and forgeries after title insurance is issued
A second form of insurance is available to lenders (with the buyer paying the cost). This insurance does not cover the buyer – only the lender. Owners will still need to seek their own cover. You may be able to negotiate splitting the cost of this insurance with the seller although there is no obligation for the seller to agree.
How does this insurance help you? First, it doesn’t guarantee title. What it does do is provide funds for certain contingencies. If, for example, there are unpaid liens on the property, this insurance will pay them out. Coverage will also be provided for legal costs in the event of a title challenge.
This is a once only cost, there are no ongoing premiums to pay and the coverage is, in theory, for as long as you (or your heirs) own the home. Once you sell the property the new owners will need to take out their own policy. Do you need this form of insurance when buying a new home? Talk to your real estate agent, but generally speaking, it makes sense being covered.
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