What is Owner’s Title Insurance and do I need it?
So you’re building a new home and are being asked about title insurance. You might be thinking, “what is owner’s title insurance, and do I need it for a brand new home?”
There are two types of title insurance:
Lenders policy: which only protects the lender for the amount of the loan. Your lender is currently requiring this policy to be purchased by you on their behalf. But remember, it only protects the bank’s interest in the property and does not extend any coverage to you as the actual home owner.
Owner’s policy: which protects you, the homeowner. This policy can be purchased at a significant discount at closing since your lender is already requiring the above policy to be purchased.
Owner’s Title Insurance
An Owner’s Title Insurance policy protects you and your investment against a wide variety of problems affecting title to your new home. Things that, if arise, could result in the loss of the property. You may be asking, “is this necessary for a new home? Nobody has owned this house before me.”
The answer is yes! The Owner’s title insurance policy protects your interest for free and clear possession, and use of the actual land where your property is located. The new house is considered an improvement to the land you are purchasing. A few examples of title defects that could affect ownership of the land include:
Errors in public records: such as old deeds and mortgages that were not properly recorded with the county.
Fraudulent deeds or missing heirs: for example, a grandson who forges his grandmothers name and coveys her property to himself. Or a separated spouse who’s former home was sold without their knowledge.
Unknown liens against the property
The list goes on and on. But you can protect yourself by purchasing an Owner’s Title Insurance policy at closing.
What does it cost?
Unlike most insurance where you pay a monthly premium, An Owner’s Title Insurance policy is purchased with a one time premium payment based on the purchase price of your new home that is paid at closing.
As mentioned above, because your lender is requiring a lender’s policy be purchased you won’t pay full cost for two insurance policies. If an owner’s policy is selected, the lender’s policy will be offered to you at a highly discounted cost called a ‘simultaneous issue rate.’
Look at it this way; since you are already responsible to pay for the lender’s policy, why not take advantage of the discount and extend coverage to protect you and your investment interests, as well? Your lender thinks it’s important, shouldn’t you?