There are two types of title insurance – a Lender’s Title Policy and an Owner’s Title Policy. To protect their interest in your mortgage from possible default, mortgage lenders require buyers to purchase a lender’s title policy, but a lender’s policy does not protect your interest as a homeowner. Your protection comes from an owner’s title policy. The owner’s title policy is paid by the seller (in CA) at closing and lasting as long as you or your heirs have an interest in the property. Having an owner’s policy will pay for all court costs and related fees associated with any covered title risk. If a claim is found to be valid, your actual loss – up to the face amount of the policy – is covered.
Who Pays Title Insurance? Buyer or Seller?
Lender’s Policy = Buyer pays, based upon loan amount.
Owner’s Policy = Seller pays, based upon purchase price.
How Much does Title Insurance Cost?
Title insurance rates are based upon filed rates with the state. The one-time investment is directly related to the value of your home; the lender’s policy is based on the loan amount
and the owner’s policy is based on the home’s purchase price.
Important Reasons to Purchase an Owner’s Policy
Purchasing an owner’s policy protects you from hidden risks which may not be disclosed by even the most thorough search of public records, including:
- Someone else owns an interest in your title
- A document is not properly signed, sealed, acknowledged, or delivered
- Forgery, fraud, duress, incompetency, incapacity or impersonation
- Defective recording of any document
- No legal right of access to and from the land
- Restrictive covenants limiting your use of the land
- A lien on your title because of a prior unsatisfied mortgage.
- A lien on your title due to a charge by a homeowner’s association
- A lien on your title, arising now or later, for labor and/or material furnished before the recording date – unless you agreed to pay for the labor or material
- Others having rights arising out of leases, contracts or options
- Someone else has an easement on your land
- Other defects, liens or encumbrances