When purchasing a new home, there are a lot of costs to consider. One expense that may come up is the purchase of an owner’s title insurance policy. This type of insurance policy is designed to protect homeowners from any unexpected claims to the title of their property. Here’s what you need to know about owner’s title insurance.
What is Title Insurance?
Title insurance is a type of insurance that protects homeowners from financial loss due to title defects. A title defect is anything that might cause a claim to be made against the property. This could be anything from a mistake in the title search to a claim from an unknown heir. Title insurance protects the homeowner from any financial loss that may occur due to these defects.
What is an Owner’s Title Insurance Policy?
An owner’s title insurance policy is a type of title insurance that specifically protects the homeowner. This type of policy is different from a lender’s title insurance policy, which protects the lender in case the homeowner defaults on their mortgage. An owner’s title insurance policy is optional, but it’s a good idea to consider purchasing it. This policy can protect the homeowner from unexpected claims to the title of their property.
Why Do You Need Owner’s Title Insurance?
There are many reasons why you might need owner’s title insurance. Here are a few examples:
1. Errors in Public Records: Sometimes public records can contain errors. These errors can cause problems with the title of your property. An owner’s title insurance policy can protect you from financial loss due to these errors.
2. Fraud: Unfortunately, fraud can occur in real estate transactions. For example, a seller may claim to have paid off liens on the property when they actually haven’t. An owner’s title insurance policy can protect you from financial loss due to fraud.
3. Undiscovered Liens: There may be liens on a property that are not discovered during the title search. These liens could be from a previous owner or from a contractor who did work on the property. An owner’s title insurance policy can protect you from financial loss due to undiscovered liens.
4. Boundary Disputes: Sometimes there are disputes about property boundaries. An owner’s title insurance policy can protect you from financial loss due to boundary disputes.
How Much Does Owner’s Title Insurance Cost?
The cost of owner’s title insurance varies depending on the value of the property. Typically, the cost is a one-time fee that is paid at closing. The cost of the policy is based on the purchase price of the property. Generally, owner’s title insurance costs between 0.5% and 1% of the purchase price of the property.
Conclusion
An owner’s title insurance policy can protect you from unexpected claims to the title of your property. It’s a good idea to consider purchasing this type of policy when buying a new home. The cost is relatively low compared to the potential financial loss that could occur without this type of protection.