Owner's Title Insurance Policy: What Homeowners Should Know

homebuyers filling out title insurance

The process of buying a home — and getting home insurance — shouldn’t be exhausting. However, that’s not the experience many first-time homebuyers have. If you don’t have the right team by your side, it’s easy to get bogged down by all the paperwork and confusing terms.

Knowing what lies ahead is easy when you have the right insurance provider. From walking you through the home insurance buying process to helping you understand key terms like owner’s title insurance, we’re here to guide you through every step. It’s what we do best.

Key takeaways:

  • Owner’s title insurance policies protect the buyers if there is a legal issue or other defects with the title.
  • You can expect to pay anywhere from $1,000 up to several thousand dollars for this coverage.
  • Lender’s title insurance is usually required and is rolled into your closing costs when buying a home.

What is an owner’s title insurance policy?

An owner’s title insurance policy provides protection if any issues come up with a home’s title. During the home buying process, the title (or documentation of ownership) will transfer from the seller to the buyer. During this time, the buyer may encounter issues with the title, such as previous unpaid debt, back taxes, or problems with wills from previous owners. If these issues do arise, owner’s title insurance will provide the buyer with financial protection for years to come.

Owner’s title insurance is sometimes bought by the seller of the home to offer the buyer some reassurance during the home buying process. However, if you’re buying a home, you may have to buy it yourself. In addition, there is another type of title insurance that you should be aware of when buying a house. 

Owner’s title insurance vs. lender’s title insurance

Owners and lender’s title insurance are often confused with one another. And while what these policies cover is generally the same, the main difference comes is who they cover. As mentioned before, owner’s title insurance policies protect the buyers if there is a legal issue with the title. Lender’s title insurance protects lenders from the same thing, up to the amount that they loaned the buyer.

What owner’s and lender’s title insurance cover is generally the same, the main difference comes from who they cover.

It’s also important to note the lender’s title insurance is typically required when you take out a loan, often lasting the life of the loan. So if you’re in the process of buying a home, make sure to take this into account so you can budget properly. Looking for more coverage? Enhanced title insurance is another option you can consider to broaden your protection plan, providing more coverage for things like liens against the property or building permit issues.

What does the owner's title insurance cover?

Owner’s title insurance protects you from any unresolved title issues that began before ownership of the property was transferred to you. From overdue HOA insurance fees and incorrect paperwork to fraud and previous lawsuits, there are various issues that you could be held responsible for if you don’t have title insurance. Below is a list of things you can expect to be covered when you purchase an owner’s title insurance policy:

  • Incorrect or fraudulent paperwork
  • Issues with wills such as:
    • Inconsistencies
    • Unknown heirs to the property
  • Lawsuits that were opened before you purchased the home
  • Lien and levies from:
    • Lenders
    • The government
    • Creditors
  • Missing information
  • Overdue HOA fees
  • Title defects

What does the owner's title insurance not cover?

Since owner’s title insurance only protects defects in the title, it doesn’t cover you from damage that occurs to your home after you purchased it (for that, you’ll need homeowners insurance). It also won’t financially shield your earnest money if a title issue prevents you from buying the home. Owner’s title insurance also won’t protect the money the mortgage company is lending you for the purchase (but lender title insurance will).

Do I need title insurance?

Technically, you don’t have to purchase owner’s title insurance (though lender’s title insurance is normally required). But as a homeowner, you want to be fully protected, right? Issues that arise with the title — or any other defect not initially disclosed to you — can sometimes take years to be discovered. And unless you have title insurance, you’ll be on the hook to pay for something that wasn’t your fault. To fully protect your interest in the property, getting title insurance is a no-brainer, especially if you have multiple real estate investments.

Issues that arise with the title — or any other defect not originally disclosed to you — can sometimes take years to be discovered.

Owner’s title insurance costs

Similar to the cost of home insurance, the average price of an owner’s title insurance policy will vary by state, title insurance company and how many policies you buy. But typically, you can expect to pay anywhere from $1,000 up to several thousand dollars for owner’s title insurance coverage. However, as a home buyer, you do have some negotiating power. You can stipulate that the sellers have to buy this coverage in your offer letter, which can help minimize the amount of closing costs you have to pay (though it’s worth noting that lender’s title insurance is a lump sum rolled into your closing costs).

As a new homeowner, being protected is likely your number one priority. Spending time to make sure you have the right protection for your home, your title and your family is crucial to a stress-free mortgage. If you’re looking to switch up your protection for a company with modern coverage that puts you first, give us a call, and we can help you get an HO-3 policy that meets your needs.