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Owner's Title Insurance Policy Cost: What Is It Worth?

Monday, July 19, 2021

The title insurance industry generates over $19.2 billion in premiums each year. It's an optional but effective way to protect you and your lender's investment in a property.

Buying a home involves transferring ownership from the buyer to yourself. What many homeowners don't realize is that this can lead to a variety of legal or financial issues. Examples include back taxes, liens, and claims of ownership.

Title insurance protects you from these problems and more. Read our guide to learn the average owner's title insurance policy cost, what it covers, and how to reduce it.

What Is a Title Insurance Policy?

A title is a term for the transfer of property ownership. It typically requires a legal document such as a deed to be official.

All titles are evaluated before they're transferred, but this isn't always enough. Title insurance protects against defects in a title such as back taxes, liens, and conflicting wills. 

These policies are different from the homeowner's insurance that protects your home from fire, burglary, and other unexpected types of damage and loss. It's required before receiving a loan, but title insurance is optional.

There are two main types of title insurance: lender's and owner's.

A lender's title insurance policy protects property lenders. Depending on the state you live in, it may only be required for federally issued mortgages or for all real estate loans.

Most lenders require a policy that covers the amount of the loan they provide to you. It remains in effect until you sell your home or pay off the loan. 

A homeowner's policy of title insurance offers protection for you as the buyer. It covers hidden hazards such as lost heirs, forged documents, and liens. As the new owner, you'll have to pay for this type of policy yourself. 

What's the Difference Between a Standard and Enhanced Policy?

There are two types of owner's insurance policies to choose from; standard and enhanced.

Standard and enhanced policies both cover:

  • Another party's interest in a property
  • Improperly signed or defectively recorded documents
  • Forgery, fraud, or duress in the chain of title
  • Restrictive covenants
  • Liens from:
    • The deed of trust or mortgage
    • Violations of Schedule B restrictions
  • Unmarkable titles

An enhanced policy covers additional issues such as:

  • A mechanic's lien
  • Forced removal of structures because they:
    • Extend onto another property or easement
    • Violate Schedule B restrictions or existing zoning law
  • Inability to use a property as a single-family residence due to violations of Schedule B restrictions or existing zoning laws
  • Unrecorded liens or easements
  • Building permit or restrictive covenant violations
  • Post-policy forgery, encroachment, adverse possession, restrictive easement, or damage caused by extracting minerals or water
  • Lack of vehicle or pedestrian access
  • Inconsistent maps
  • Covenant violation that reverts the title to its previous owner
  • Violations of business setback regulations
  • Discriminatory covenants

Other forms of lifelong coverage from an enhanced policy include:

  • Additional ownership coverage
  • Boundary wall or fence encroachment
  • Post policy inflation
  • Post-policy living trusts
  • Pays rent for substitute land or facilities
  • Rights under unrecorded leases
  • Plain language statements of policy coverage and restrictions
  • Subdivision law violation
  • Coverage for boundary wall or fence encroachment

Enhanced policies also pay rent for substitute land or facilities, increase your home's marketability, give you rights under unrecorded leases, and include plain language statements of your coverage and restrictions. They're more expensive but provide comprehensive coverage that can save you from dealing with an expensive issue later.

What is the Average Owner's Title Insurance Policy Cost?

The cost of an owner's title insurance policy is 0.5-1% of the buyer's price for the home. The price combines the lender's and home owner's policy and ranges between $500 and $3,500.

Costs differ based on several factors, including:

  • The property's location and history
  • The house's cost, age, and condition
  • The loan amount
  • The title insurance agent you choose
  • Whether or not you choose extended coverage
  • State laws

Pennsylvania is an all-inclusive rate state. Your owner's title insurance policy cost includes the risk of buying a home and the cost of the search and examination of land records, escrow, and settlement services.

How Can I Reduce My Costs?

A bit of preparation can save you money on your owner's title insurance policy costs.

Calculate all of your closing expenses, including property taxes, appraisal fees, and homeowner's insurance. Use these numbers to create a budget to see how much title insurance you can afford.

Look at all the options your lender offers. Choose the right level of coverage and decide whether you need a standard or enhanced policy. This will save you from paying for more than you need. 

Title insurance companies may charge additional fees for standard services such as settlement, incoming and outgoing wires, and document preparation fees. They cost $230-$320. Look for a provider that waves these fees and gives a clear list of what they'll charge you for.

Look at online reviews to find the best title insurance lender. They'll give you a sense of what sort of experience previous clients have had. Find a lender that charges fair rates that don't include hidden fees and gives you a complete overview of what their policies cover.

It may be possible to convince a property's seller to pay for your new home's title insurance policy. Use the research you've done to show them that the money you're saving by finding an affordable provider will make it worth the purchase for them.

Where Can I Find the Best Title Insurance Policy?

Homeowner's insurance isn't always enough. Title insurance helps by covering issues resulting from improperly filed titles.

A lender's policy protects your lender's investment. An owner's policy protects yours. The level of coverage differs depending on which lender you choose and whether you purchase a standard or enhanced policy.

Your owner's title insurance policy cost is based on factors such as where you live and the value of your property. Researching to find the best lender is the best way to save money.

Heartland Abstract can help you find the right title insurance policy. Contact us today to learn more.

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