There are few things more important than protecting a home. Even the best title search and examination cannot protect your equity and home from matters not appearing in the public record.
Very few people in the industry realize that, like other insurance products, the title insurance industry has insurance products that offer different coverage. Some of the largest title insurance underwriters in the industry, offer an “enhanced” policy, which offers additional coverage from the “standard” coverage to the homeowner.
For example, a “standard” policy covers the homeowner for matters affecting title up to and including the date of the recordation of the Deed, while its “enhanced” policy provides coverage for up to 28 additional risks, many of them pertaining to future coverage and automatic increases of coverage to cover increases in the value of property.
Although, the enhanced policy premium is ten percent (10%) higher than the standard policy premium, the reality is a minimal cost to the homeowner for the ability to substantially reduce their risk and exposure on one of the largest investments they will make in a lifetime.
Understanding the differences between basic title insurance coverage and the enhanced title insurance coverage available from some companies can help you determine which of these options is the right fit for your needs. Here are some of the most important differences between these two types of coverage for your title insurance needs.
Basic Title Insurance Coverage
As you might expect, basic title insurance covers just the basics and includes protection against the following potential claims against your property:
• Mechanic’s Lien Coverage
• Third Party claims an interest in the title
• Improperly executed documents
• Pre-Policy forgery, fraud or duress
• Non-recorded restrictive covenants
• Defective recording of documents
• Prior recorded liens not disclosed in the policy
• Unmarketability of the title
Enhanced Title Insurance Coverage
Enhanced title insurance policies include all the coverages of basic title insurance and add protection against a few more risks:
• Automatic Increase in original policy amount to cover increased in value of the property
• Policy insures anyone who inherits property from homeowner
• Policy insures a Trustee you transfer the property to after policy date
• Post Policy Forgery
• Post Policy encroachment onto insured land
• Enhanced existing right of access by including both pedestrian and vehicular access
• Losses due to building permit violations
• Losses due to existing violation of subdivision law
• Post policy structural damage from third party easement for mineral extraction
• Violations of restrictive covenants identified in the Policy:
Resulting in loss of title
Resulting in loss from correction or removal
Resulting in loss of use where single family dwelling prohibited
• Forced Removal of existing structure that:
Encroach onto an easement identified in the policy
Violate a building restriction line identified in the policy
Encroach onto a neighbor’s land
The added protection available from enhanced title insurance coverage is usually well worth the small added cost at the time of closing or final sale. When purchasing a home, you should consider obtaining an enhanced title insurance policy, to protect you both at the time of closing and for the years to come.