Owner’s title insurance takes up a sizable portion of your closing costs in a home purchase. It’s entirely optional, but most professionals involved in the transaction, from agents to loan officers to attorneys, strongly suggest you purchase it.
What is owner’s title insurance?
Owner’s title insurance protects you in the case that someone tries to contest your ownership of your property. In short, the insurance protects against “defects” in the title conveyance.
An example of some of the problems:
- A person in bankruptcy who has no authority to sign the deed conveys property to a third party.
- A grandson forges his grandmother’s name to a deed and conveys her property to a third party, or to himself.
- A mortgage (deed of trust) is properly recorded on the land records, but there is no legal description identifying the property that is subject to the mortgage. As a result, creditors are not put on notice of the existence of this mortgage lien, and may make another loan, which will not have first-trust priority.
- A deed (or other legal document) is improperly recorded with the wrong legal description.
The list goes on and on. Everything on that list could have happened 10, 20, or more than 40 years before you purchase the property without the knowledge of the current occupants. Even if the current occupants are the original owners of the home, the land itself almost assuredly had owners and before them.
Lender’s vs. Owner’s Title Insurance
Owner’s title insurance should not be confused with lender’s title insurance, a requirement on every mortgage transaction, purchase or refinance. Lender’s title insurance protects the lender from the exact same issues mentioned above. It should be noted that lenders see fit to make lender’s title insurance mandatory. While they’re not legally allowed to implement the same requirement for owner’s title insurance, you can be sure they wish they could as the policies provide protection from potentially monstrously large legal fees and bills.
How long does owner’s title insurance last?
Title insurance extends backwards from the date of implementation and doesn’t cover any defects that occur after the date of implementation. This is the opposite of almost every other type of insurance, which protects insureds starting on implementation, rather than ending then.
Do I need a new owner’s policy if I refinance?
No. But your lender will require a new lender’s title insurance policy.
How Much Is Owner’s Title Insurance?
To get an idea, use this calculator by one of the largest providers of title insurance in the country.