400 Creekside Drive, Suite 407-409 Pottstown, PA 19464

Enhanced Title Insurance: Key Features You Need to Consider

Monday, September 14, 2020

The risks surrounding home title fraud have expanded and are now part of cybercrimes that fall under the investigation of the FBI. The FBI had 301,580 wire fraud complaints in 2017. In the rental and real estate industry, 9,600 victims had a cumulative loss of more than $56 million.

The risks for mortgage fraud have also grown 12.4% year-over-year when comparing the second quarter of 2018 to the same period of 2017.

What this means to you as a home buyer is that the need for enhanced title insurance has increased. Here is why you need to consider purchasing an owner’s title insurance policy that goes beyond the standard title insurance.

The Basics

Many new home buyers assume that the mandatory title insurance policy they pay for covers them if there is a problem with the title. This is not true.

The mandatory policy you purchase is for the lender, and the lender is the only beneficiary of that policy. If a problem arises with the title you have no coverage to protect your interests.

There is a standard title insurance policy that homeowners have the option of purchasing. This policy covers the buyer only, and for a one-time cost, covers the homeowner as long as they are in the home. This provides coverage for the following potential claims against the property:

  • The title is unmarketable
  • There is a lien against the title for the deed of trust/mortgage
  • There is a lien against the title because of a Schedule B restriction violation
  • There are restrictive covenants
  • There was a defective recording of documents
  • There is a fraud, forgery, or duress in the chain of title
  • A document lacking the proper signature

The items the standard policy covers are things that happened prior to your purchase of the home.

These claims are usually from things such as an undisclosed but recorded prior mortgage or lien, an undisclosed but recorded easement or use restriction, inadequate legal description, no right of access to the property, and deeds that are not recorded properly.

Claims may also arise if there are persons who are not on the deed but have an interest in the property such as co-owners, spouses, heirs, business partners, or corporate officers. Filing of claims also includes problems when documents contain forged signatures or persons who sign documents who are not mentally competent or lack legal authority.

The standard title insurance policy is good coverage and is certainly better than not purchasing any protection for your home. We recommend you compare standard vs enhanced title insurance. 

Enhanced Title Insurance

Enhanced title insurance provides you with all the coverage of the standard policy, plus additional protection against risk. The extensive coverage this policy provides is well worth the additional cost. When comparing to the standard policy, the difference in coverage is significant:

  • All 7 items covered in the standard title insurance policy
  • Mechanic’s lien
  • Forced removal of a structure because it extends onto an easement or other property
  • Forced removal of a structure because it violates a restriction in Schedule B
  • Forced removal of a structure because it violates existing zoning laws
  • The property violates a restriction in Schedule B or zoning preventing use as a single-family residence
  • A homeowner’s association has an unrecorded lien
  • Easements that are not recorded
  • Violation of building permit requirements
  • Violation of a restrictive covenant
  • Post-policy adverse possession
  • Post-policy prescriptive easement
  • Post-policy forgery
  • Post-policy encroachment
  • Post-policy damage due to extractions of water or minerals
  • No pedestrian or vehicle access
  • Legal description and maps do not agree
  • Violation of covenant the results in reversing the title to a previous owner
  • Building setback regulation violations
  • Discriminatory covenants

In addition to the above, purchasing an enhanced policy provides some additional benefits.

Additional Enhanced Policy Benefits

In addition to the above, purchasing an enhanced title insurance policy includes the following benefits:

  • Rights under leases that are not recorded
  • Pays for rental of substitute facilities or land
  • Provides plain language statements of the policy restrictions and coverage
  • Violation of subdivision law
  • Coverage for fence encroachment and boundary walls
  • Post-policy coverage for a living trust
  • Post-policy coverage for inflation (150% over five years)
  • Lifetime insurance coverage
  • Enhanced ownership coverage increases marketability

The cost of an enhanced policy is higher than the cost of a standard policy but provides a substantial amount of additional coverage for the price.

You may purchase your enhanced policy at the time you close on the purchase of your home. A real advantage of the enhanced policy is it covers post-policy items, including protection for inflation.

If you decide to refinance your home, contact your insurance company and inquire about a re-issue rate. Because the insurer already has that home under an existing policy, it will usually offer substantial savings for rolling the policy over into a new mortgage.

Heartland Abstract v. Competition

When pricing your policy there are five things you should consider:

  1. Who Pays for the Insurance?
  2. Which Policy Should I Get?
  3. What Does My Policy Cover?
  4. How Much Does Title Insurance Cost?
  5. How Long Does a Title Claim Search Take?

The price difference of an enhanced or standard lender’s policy and a standard or enhanced owner’s policy has no price difference between Heartland Abstract and the competition. This is because pricing is regulated by the Pennsylvania Department of Insurance. 

There are significant differences when it comes to other mandatory closing costs. This is where your choice in a title insurance company can impact how much you pay out-of-pocket at closing:

Title Endorsements

  • Heartland Abstract—$150.00
  • Competition—$150.00

Insured Closing Letter

  • Heartland—$125.00
  • Competition—$125.00

Notary Fees

  • Heartland—$20.00 to $40.00
  • Competition—$20.00 to $40.00

Document Preparation Fee               

  • Heartland—No Charge                       
  • Competition—$50.00 to $100.00

E Document Preparation

  • Heartland—No Charge
  • Competition—$25.00 to $50.00

Incoming Wire Fee

  • Heartland—No Charge
  • Competition—$10.00 to $25.00

Outgoing Wire Fee

  • Heartland—No Charge
  • Competition—$15.00 to $30.00

Settlement Fee

  • Heartland—No Charge
  • Competition—$75.00

Express Fee to Return Loan Documents

  • Heartland—No Charge
  • Competition—$40.00

While the out-of-pocket costs for the competition look small individually, collectively they can add up to $635.00 to your closing fees.

Compare Before You Buy

When comparing title insurance coverage and insurance providers, careful shopping gets you more bang for your buck. If you are in the market for a new home, prepare in advance by contacting Heartland Abstract for more information on standard vs enhanced title insurance.

We offer great pricing that ensures your investment remains solid. Feel free to call us (610) 326-6300 with any questions you have about title insurance packages.

View All Recent Posts