Purchasing real estate is a big investment. As a buyer, it is important to ensure that your property rights are protected. It would be a shame for someone to buy their dream home only to find out after closing that there was a defect in the chain of title of the real property arising out of past events outside of the buyer’s control. Such defect could result in loss of the buyer’s ownership or subject the homebuyer to paying a bill left unpaid by any previous owner. This is why purchasers of real estate should protect their investment (and their peace of mind) by getting an owner’s title insurance policy.
Unlike other types of insurance policies, an owner’s title insurance policy is a one-time premium, which is regulated by the state, and paid at closing. The policy will protect your property rights for as long as you or your heirs own the property up to the purchase price of your property (or more if you opt to purchase additional coverage value). An owner’s policy protects you from things undiscovered during the title exam process, including: unknown open mortgages, unpaid property taxes, mechanic’s liens, boundary issues, missing heirs who could claim the property belongs to him or her, and missed easements or rights of way that could limit your use of the property. It has been reported that title searches reveal problems on more than a third of all residential real estate transactions. In addition to protecting your investment, an owner’s policy also covers the legal fees and the cost of defending your property rights in the event a claim is made against the policy.
Notably, there may be exceptions to the owner’s policy coverage. Exceptions are items not covered by the title policy, which means the title company will not pay a claim or defend against a claim based on these excepted items. Common exceptions include the following: prior unreleased mortgages on the property, easements, building or use restrictions contained in recorded or filed maps, agreements or deeds, and survey issues.
In conclusion, purchasers of real estate should get owner’s title insurance to protect their investment and avoid being financially liable for undiscovered title defects that can remain undetected until after the closing.