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The Extra Benefits of an Enhanced Title Insurance Policy

Monday, June 6, 2022

Imagine closing on your new home only to find that back property taxes are owed from a previous owner. You could be on the hook for the back taxes if you don't have title insurance.

According to Bankrate.com, the two most common property title issues are fraud and mistakes. While owner's title insurance is not required, it can save you thousands should any title defects come up at any point while you have ownership of your home.

There are two types of owner's title insurance policy options: standard and enhanced. Here is what homeowners need to know about both types and some of the extra benefits an enhanced title provides.

What Is Home Title Insurance?

Home title insurance protects homebuyers from a monetary loss due to a defect or error in a title to a property. For any real estate transaction, a title company performs a title search to check for liens or claims against the property that can affect the sale of the property and the homeowner.

A title without any liens or claims is considered "clean." Common claims that may come up in a title search that can make a title "dirty" are back taxes and liens from home loans and easements, among other things.

While home insurance protects the homebuyer against any title defects or errors during the home purchase process, it can also provide some protection throughout the duration of homeownership.

Types of Owner's Title Insurance

There are two types of home title insurance: standard and enhanced. The difference between these two can be significant depending on the insurer. Here are some things to know about each and some extra benefits that enhanced title insurance provides beyond a standard policy.

Standard title insurance provides basic coverage to homeowners, such as:

  • Unmarketability of the title (i.e., the inability to transfer ownership)
  • A document not properly signed
  • Forgery, fraud, or duress in the chain of title
  • Defective recording of any documents
  • Restrictive covenants

One standard policy coverage becoming ever more essential for homeowners is fraud protection. Criminals use phishing tactics and other means to attempt ownership transfer of homes using fraudulent property titles. You could face a title fraud issue years or even decades after purchasing your house.

Standard title insurance can help protect you from third-party claims on your property since these claims would not show up on your initial title search.

Enhanced title insurance includes all coverage of a standard policy plus protection from many additional risks and costs. While an enhanced policy will cost you more, it can be well worth it for some property owners. Here are some of the benefits you should know about before choosing a policy.

Extra Benefits of Enhanced Title Insurance

These are just some of the extra benefits an enhanced policy provides. Some of these situations are even covered after the policy end date.

Unrecorded Easements

Unrecorded easements are land use by someone other than the owner of the record. A good example is a neighbor's fence installed 10 feet over the property line. Such land use would not show up on a property title search.

Perhaps the previous homeowners didn't care, but you might want that fence moved so you can access all of your new property. If the case were to end up in court, enhanced title insurance would cover the legal costs.

Forced Removal of a Structure

Suppose the neighbor with the fence also put a small shed against the fence. The shed sits on your new property, too, and you want the shed and the fence moved or removed. This is referred to as the forced removal of a structure and would be covered by an enhanced policy.

An enhanced policy would also cover a forced removal of a structure placed on your property after the policy date.

Unrecorded Lien by a Homeowners' Association

A title search will not always find unrecorded liens, but they could be costly to a new homeowner.

This can happen with unpaid homeowners' association dues and fines. If an unrecorded lien still exists on the property, you could end up responsible for them as the new homeowner. Enhanced title insurance would cover the cost.

Restrictive Covenant Violations

Restrictive covenants are also part of a homeowners' association. These rules state what you cannot do with your property. If you purchase in an HOA neighborhood and are not fully informed of all restrictions, you could inadvertently break one. Enhanced insurance would cover any fines.

Mechanics Lien

Contractors can have a lien placed on a property if the homeowner has not paid for services. The is to ensure they get their money at some point. You could possibly become responsible for such liens as the new property owner. An enhanced property would cover such liens.

Post-Policy Benefits

Post-policy benefits are issues you may run into during the policy term, but they will be covered under standard insurance. With enhanced insurance, you can get covered after the end of your policy date.

This is especially useful if you believe there may be future third-party claims, such as due to fraud.

Other Extra Benefits

This list of benefits is not exhaustive, but a few others include:

  • Unrecorded easements
  • Building permit violations
  • Restrictive Covenant violations
  • Maps not consistent with the legal description
  • Post policy inflation coverage (150% over five years)

Should You Consider a Title Insurance Policy?

An enhanced policy provides these extra benefits, but not everyone needs an enhanced policy. An insurance agent can best explain each of the benefits in detail so you can make the best decision when choosing a policy.

Are you looking for a reliable title insurance company? Contact us today, and we'll help you decide which policy is best for your property.

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