To put it simply, title insurance is a way to protect yourself from financial loss and related legal expenses in the event there is a defect in title to your property that is covered by the policy. Title insurance differs from other types of insurance in that it focuses on risk prevention, rather than risk assumption. With title insurance, title examiners review the history of your property and seek to eliminate title issues before the purchase occurs. Title insurance also differs in that it comes with no monthly payment. It’s just a one-time premium paid at closing.
Do I need title insurance?
Absolutely. Title insurance is a way to protect what is likely your largest investment—your home. An Owner’s Policy provides peace of mind that your title company will stand behind you if a covered title issue or defect arises after you have bought your home.
What does title insurance cover?
Any number of title issues may arise, even after the most meticulous search of public records. These hidden defects are dangerous because you might not learn about them for months, or even years, after purchase. Some common examples of risks covered by your Owner’s Policy include defects in title caused by:
- Improper execution of documents
- Mistakes in recording or indexing legal documents
- Forgeries and fraud
- Undisclosed or missing heirs
- Unpaid taxes and assessments
- Unpaid judgments and liens
- Unreleased mortgages
- Mental incompetence of grantors on the deed
- Impersonation of the true owners of the land by fraudulent persons
- Refusal of a potential purchaser to accept title based on the condition of the title
How much does title insurance cost?
The one-time premium that you’ll pay for a title insurance policy varies by state, but generally is related to the value of your property. You can use our Rate Calculator to estimate how much your title insurance policy may cost.
What’s lender’s title insurance?
A Lenders policy is title insurance policy that insures the mortgagee (being the lender in the mortgage document), against loss caused by invalidity or unenforceability of the mortgage lien, which might occur as a result of defective title, or against loss of priority of the mortgage. The amount of insurance for the Loan Policy is based on the dollar amount of the loan; by design, the amount of insurance decreases each year as the loan is paid off.
Although the borrower usually pays for the cost for the Lenders Policy, it provides no protection for the property purchaser. For the purchaser to obtain title insurance, a separate Owners Policy must be issued.
Enhanced vs. Standard Coverage
There are two kinds of policies available for residential property in Pennsylvania; the more comprehensive “Enhanced Policy”, and the “Standard Policy” that provides less coverage but has a slightly lower premium.
What’s Owner’s Title Insurance?
An Owner’s policy is title insurance policy that protects purchasers of real estate against loss resulting from a defect in title. If the insured suffers a loss as a result of title defect, the title company will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy. A title insurance policy will:
- PROTECT THE INSURED FROM FINANCIAL LOSS due to covered claims that may be asserted against the title to the real estate, up to the face amount of the title policy
- PAY LEGAL COSTS if the title insurer has to defend the title to real estate against a covered claim
- PAY ALL SUCCESSFUL CLAIMS against the title to the real estate covered by the policy, up to the face amount of the policy.
There are two types of owner’s title insurance policies certified by the American Land Title Association – the Owner’s policy and the Homeowner’s policy. The Owner’s policy protects you from defects and liens in the history of your title through the date and time your deed is recorded in the public records. The Homeowner’s policy takes your protection to a higher level by providing coverage for many additional risks – including some that might occur after the deed has been recorded. The Homeowner’s policy protects against many common, frustrating problems; and protects your investment for as long as you or your heirs own the property. Read on for a description of some of the additional coverage’s you’ll receive when you upgrade to a Homeowner’s policy.
- Building Permit Violation Coverage
Covers up to $25,000 after a deductible equal to the lesser of one percent of the policy amount, or $5,000. This coverage applies if you have to remove an existing structure (excluding boundary walls and fences) built by a previous owner who did not obtain the required permits.
- Subdivision Map Act Coverage
Pays up to $10,000 after a deductible equal to the lesser of one percent of the policy amount, or $2,500. This coverage applies if you cannot close a sale, secure a loan or obtain a building permit because the land was improperly subdivided prior to purchase.
- Location Coverage
Ensures that the home has the same address as the property insured in the policy.
- Restrictive Covenant Violations Coverage
Protects against loss of title if someone attempts to enforce an existing restrictive covenant due to a violation that occurred before the policy date.
- Zoning Coverage
Protects if you are forced to remove or remedy a structure because it violates zoning laws. Protection for forced remedy of violations is subject to a deductible and a maximum dollar amount.
- Post-Policy Coverage
Protects against possible post-policy ownership claims as a result of forgery or encroachment.
- Enhanced Access Coverage
Covers actual pedestrian and vehicular access to the property.
- Encroachment Coverage
Protects against someone building a structure (excluding boundary walls and fences) that encroaches on the insured property.
- Supplemental Taxes
Protects against supplemental taxes for construction, change of use or ownership.
- Other Substances
Protects all existing structures and landscaping (including future replacements) on the property, against damage caused by others using the land for extraction and development of minerals, water and other substances.
- Automatic Coverage Increases
Each of the first five years, the policy amount will automatically increase by 10 percent in value, up to a total of 150 percent, to cover increases in the value of the insured property.
- Living Trust Coverage
Extends policy protection to include a trust you create.