An Ounce of Prevention Is Worth a Pound of Cure: Enhanced Owner’s Title Insurance Offers Valuable Benefits

by Rich Vetstein on April 13, 2011 · 5 comments

in Massachusetts Real Estate Law, Title Defects, Title Insurance

When you find out you have a major title problem that prevents you from selling or refinancing your home, have fun explaining to your spouse that for a fraction of the cost of your home you could’ve prevented it by buying title insurance.

Enhanced Owner’s Title Insurance Coverage

Available for a few years now, enhanced coverage policies offer vastly improved protection for common title problems at about a 10% cost over a standard coverage policy. (These policies run about $4 per thousand of purchase price). Enhanced coverage policies now cover some of the most common title problems facing Massachusetts residents. Realtors and mortgage professionals should be aware of the benefits of an enhanced coverage policy, and should recommend that their clients opt for the increased coverage. It’s well worth the small cost in premium.

Additional Coverages:

  • Appreciation in property value. Standard policies do not increase their coverage amount in a rising market as a home increases in value. The enhanced policy will increase coverage by 10% per year for 5 years up to 150% of the original policy limit.
  • Encroachments/adverse possession. Standard policies, to most homeowner’s chagrin, do not cover encroachments like a neighbor’s fence, wall or structure over a property line. Enhanced policies provide coverage for such encroachments, and also cover adverse possession–which occurs when an encroachment exists for 20 or more uninterrupted years. For more info on Massachusetts adverse possession, please read our post “Good Fences May Make For Upset Neighbors”.
  • Zoning/Subdivision/Building permit violations. Enhanced coverage policies now provide coverage if the property is not zoned for residential 1-4 family use, in violation of subdivision regulations, or if there is a defect or lack of a building permit. This is a tremendous benefit for commonly arising situations.
  • Easements. Enhanced policies offer coverage for easement encroachment situations such as deeded driveways, drainage easements, utility easements, beach paths, walking paths, etc.
  • Expanded Insured. Enhanced policies will now transfer to a spouse who gets property in a divorce, inheriting heirs, related family trusts and their beneficiaries.
  • Expanded Access Coverage. Enhanced policies now guarantee that your home as adequate vehicular and foot access over adequate streets or roads if there’s a title defect rendering your lot “land-locked.”

Do I Really Need Title Insurance?

The decision to get an owner’s title insurance policy is one of the most important choices you make in connection with your real estate transaction.

As part of every real estate transaction, the borrower/buyer is offered the opportunity to get an owner’s title insurance policy. (For refinances and purchases, your lender will require you to purchase a “lender’s” title insurance policy.) An owner’s title insurance provides the most comprehensive protection available for most every known type of title problem which could affect your property rights. I’m proud to say that every single one of my buyer clients have benefited from an owner’s title insurance policy at their closings, at my strong recommendation.

One needs only to look at the recent controversies over “robo-signing” and the U.S. Bank v. Ibanez defective foreclosure sales, which has stripped thousands of Massachusetts property owners of their property ownership rights, to see why an owner’s title insurance policy could be the best decision a home buyer ever makes. The unfortunate souls who declined owner’s title insurance are now left without legal title to their homes and looking at the prospect of spending thousands of dollars in legal fees to resolve their title issues with no guarantee of success. With a title insurance policy, the title insurance company will hire expert title attorneys to solve title issues at no cost to you, defend against any adverse claims, reimburse you for covered damages, and most valuable, issue affirmative coverage to enable a pending closing to move forward.

When you find out you have a major title problem that prevents you from selling or refinancing your home, have fun explaining to your spouse that for a fraction of the cost of your home you could’ve prevented it by buying title insurance.

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