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Standard vs Enhanced Insurance Policies: What's the Difference?

Monday, May 25, 2020
When choosing title insurance, you need to decide between a standard insurance policy versus an enhanced insurance policy. There are several things to consider, but the main difference is the scope of what they cover.
Read below to find out what the scope of those differences are, and decide if you want Standard Insurance or Enhanced Insurance.
 

What Is Title Insurance?

 
First, let's discuss what title insurance is. Title insurance is a kind of insurance that protects homeowners and or mortgage lenders in case a claim about ownership of a property is made against you.
A person or entity may question the legality of how you attained your home or how the property was sold. If there is a dispute about said property after the point of sale, the title insurance covers your costs and fees during the process.
Title insurance is more or less retroactive insurance. Most other types of insurance cover you from any future problems you might have. Title insurance protects you from past discrepancies of previous owners or the owner you purchased the home form.
These discrepancies can come up after the purchase or even during the process.
 

What Types of Title Insurance Are There?

 
There are two types of title insurance; Lenders and Owners. They provide the exact same protection but cover different entities. Both sides have a stake in the property but they're on different sides of the playing field.
 

For Lender's

 
Policies for lenders protect the financial institution or lending party. Most lenders require any borrower to purchase this insurance. They consider it a closing cost for the sale of the title.
 

For Owner's

 
If any claims arise disputing ownership of the home, the homeowner is protected by homeowners' title insurance. Homeowner's title insurance isn't required but it's highly recommended when purchasing a home.
Sometimes you can negotiate with the seller and they will pay for it. This depends on who you're buying from and what their situation is. Maybe they really want to get rid of the property? In this case, you have a lot more leverage in the deal.
 

Why Do I Need It?

 
Not everyone needs title insurance, however, it can come in handy someday. Buyers aren't required to get title insurance, but it can really protect you if someone does make a claim against the validity of your ownership of a property. 
Lawyers are expensive and things can drag on a long time. The title insurance will take care of your legal fees. This can save your financial life in some cases.
  • Exhibit A
It's a few months after the sale of your home went through. Someone uncovers an old lien against the property for say $50,000. It doesn't matter that you just took ownership of the home, you can still be sued or held responsible for the lien. 
You'll need a title or real estate lawyer to help you with your case. Owners title insurance covers your legal fees, which can really pile up.
 

Standard Insurance

 
Standard insurance is pretty much what it sounds likes. It typically covers your basic needs and is general in wording. 
Standard insurance covers you from things like poor or incorrect documentation. Maybe there appears to be forgery or fraud somewhere along the line? Or, there was reported duress during the signing of the title?
Or, if somebody else owns an interest in your title. It also covers you if documents were signed incorrectly or they were recorded improperly.
Also, there could be restrictive covenants. Restrictive covenants are provisions in a deed restraint of what the owner is able to do with the property. There might be a Deed, Trust, or Mortgage Lien on the title.
The title might be in violation of Schedule B. Schedule B is a title exception. Lastly, the title could be named unmarketable.
 

Enhanced Insurance

 
An enhanced insurance policy is pretty much the kitchen sink. It's basically insurance for the long-haul. It protects you from just about anything.
Enhanced title insurance covers everything in the standard policy and tons more. It even covers some things post-policy. It's the kitchen sink policy.
Along with the basics that are in the standard policy enhanced coverage also protects you from things such as a mechanic's lien, forced removal of a structure. If the use of your home violates a zoning restriction or in Schedule B. 
Enhanced title insurance also covers you from an unrecorded homeowner's association lien or easement. It also protects you from building permit and restrictive covenant violations.
You'll also have protections from post-policy forgery, post-policy encroachment, or mineral water damage.
Some other benefits are being protected from lack of vehicular and pedestrian access fines, and if maps are or are not consistent with the legal description. 
Post policy prescriptive easement and post-policy adverse possession are protected. Violation of building set back, and covenant violations a result of a previous owner, and building set back regulations are included.
Discriminatory covenants, and substitute land or rent facilities are paid for. Unrecorded leases and plain language statements are covered. Fence or boundary wall encroachment is covered too. 
You'll also get lifetime coverage and post-policy inflation coverage up to 150% for five years. The added coverage gives you enhanced marketability. You'll get post-policy living trust coverage too.
There are deductibles and maximum limits and of course, and the enhanced policy will cost you more than the standard insurance.
 

Cost

You might be wondering what will all of this cost me? Well, depending on the company you buy your title insurance from things can get expensive. However, if you make a smart cost-effective choice you can get all the bells and whistles for a fair price.

Who's the Winner?

After going through all of the benefits for each policy, it's safe to say buying enhanced insurance on the title of your home is a great choice.
Unless you are sure that you won't have to deal with any of the issues the basic plan doesn't cover, then the enhanced version is the way to go. Click here to have a look at what it would look like for you.

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