Is Enhanced Title Insurance Right for You?

Title Insurance Basics

Title insurance provides protection for homeowners, safeguarding against hidden risks to your property's title. Unlike other insurance types, it's a one-time premium paid at closing that remains effective as long as you or your heirs own the home.

Title insurance is important for several reasons:

• It safeguards your property rights
• It protects your financial investment by covering potential legal fees and losses if title issues arise
• It provides peace of mind, allowing you to enjoy your home without the worry of unforeseen title problems

Title insurance is available for both homeowners and lenders.

Comparing Enhanced Title Insurance to the Standard Owner's Policy

Standard and enhanced title insurance policies share many similarities. Both offer comprehensive protection for your property's title, addressing the most common issues that could affect your ownership rights. These policies are underwritten by reputable title insurance providers, ensuring reliable coverage. Both policy types protect against risks like errors in public records, undisclosed liens, and fraudulent claims to ownership.

However, enhanced title insurance differs from standard policies in several ways. One key difference is post-policy protection. Enhanced policies often cover certain issues that arise after you purchase the property, while standard policies typically only cover pre-existing issues.

Enhanced policies also cover additional risks not included in standard policies. These may include zoning violations, building permit issues, or encroachments that aren't discovered during the initial title search. Additionally, enhanced policies feature inflation protection (up to 150% of the original policy amount). Enhanced policies generally cost about 10% more than standard policies.

Advantages of Enhanced Title Insurance Protection

An enhanced owner's title insurance policy offers several additional benefits. Here are five key advantages of opting for enhanced coverage over standard owner's title insurance.

Advantage #1: Expanded Coverage

Enhanced title insurance offers broader protection than standard policies, covering more risks -- including those that may arise after closing. This expanded coverage includes issues such as building permit violations, encroachments by neighbors, and zoning violations that might not be discovered during the initial title search.

For example, imagine you've owned your home for several years and decide to sell. During the buyer's inspection, it's discovered that a previous owner added a sunroom without proper permits. With a standard policy, you'd be responsible for resolving this issue. However, an enhanced policy would cover the costs of bringing the addition up to code or removing it if necessary.

Advantage #2: Inflation Protection

Enhanced title insurance includes a valuable feature: inflation protection. This means the policy's coverage limits increase over time to keep pace with rising property values, providing additional financial security as your home appreciates.

For instance, if you purchased your home for $200,000 in 2018, it will likely be worth much more today. While a standard policy would still only cover you for the original purchase price, an enhanced policy can increase its coverage up to 150% of the original amount. In this case, that would mean protection up to $300,000.

This automatic adjustment ensures your title insurance keeps up with your home's value.

Advantage #3: Coverage for Structural Damage

Enhanced title insurance policies often include protection against structural damage caused by third-party claims. This coverage extends to issues like encroachments or building setback violations that weren't identified before you purchased the property.

Unlike standard policies, which typically only cover title-related issues, enhanced policies can provide financial protection for physical damage to your home resulting from these hidden problems. This expanded coverage can be particularly valuable for older homes or properties in densely populated areas where boundary issues are more common.

For example, imagine you discover that a small portion of your home's foundation was unknowingly built on your neighbor's property years ago. This encroachment wasn't detected during the initial title search. Your neighbor demands the removal of the encroaching part, which would compromise your home's structural integrity. With an enhanced policy, you'd likely be covered for the costs of addressing the encroachment and repairing any resulting structural damage to your home.

Advantage #4: Post-Policy Fraud Protection

Enhanced title insurance offers post-policy fraud protection, covering instances of fraud, forgery, or impersonation that may occur after you've purchased your home. This protection extends to cases of identity theft related to property ownership.

Unlike standard policies, which typically only cover issues that existed before you bought the property, enhanced policies continue to protect you against certain types of fraud throughout your ownership. This ongoing protection is particularly valuable in an era where sophisticated scams and cyber fraud are becoming more prevalent in real estate transactions.

For example, if a criminal forges your signature on a deed, they can transfer your property to themselves or a third party without your knowledge. With a standard policy, you might be left to fight this battle on your own. However, an enhanced policy would typically cover the legal costs to reclaim your property and clear your title, protecting you from potentially devastating financial loss and stress.

Advantage #5: Access and Easement Protections

Enhanced title insurance policies offer broader protections regarding access to your property. They often cover disputes or issues with existing easements or restrictions that a standard policy might exclude. This expanded coverage can be particularly valuable in rural areas or properties with shared access points.

For example, imagine you've been using a shared driveway for years, only to have a neighbor suddenly challenge your right-of-way access. With a standard policy, you might be on your own to resolve this dispute. However, an enhanced policy would typically cover the legal costs to defend your access rights, potentially saving you thousands in legal fees and ensuring you maintain proper access to your property.

Limitations to Enhanced Title Insurance

While enhanced title insurance offers broad protection, it's important to understand that not all risks are covered. For example, issues that arise from your own actions, such as failing to pay property taxes, typically aren't covered by any title insurance policy.

Always read your policy details carefully. Each policy may have specific terms, conditions, and exclusions. When in doubt, reach out to your title company for more information about the extent of your title insurance coverage.

When to Consider Enhanced Title Insurance

While standard title insurance offers valuable protection, there are situations where enhanced coverage might be a smart choice. Here are some scenarios where you may want to consider an enhanced title insurance policy:

• High-value properties: If you're investing in a high-end home, the additional protection offered by an enhanced policy can be particularly valuable. The increased coverage limits and broader protections align well with the higher financial stakes involved in luxury real estate.
• Older homes with complex histories: Properties that have changed hands many times over the years or undergone significant renovations may have a higher risk of title issues. An enhanced policy can provide extra security against potential problems arising from the property's complex past.
• Properties in rapidly appreciating markets: In areas where property values are rising quickly, an enhanced policy's automatic inflation protection can be especially beneficial. This feature helps ensure your coverage keeps pace with your home's increasing value over time.
• When you need extra peace of mind: If you're the type of homeowner who prefers comprehensive protection, an enhanced policy can offer additional reassurance. The broader coverage for post-closing issues like permit violations or boundary disputes can help you feel more secure in your investment.

Remember, while enhanced coverage offers broader protection, it's not necessary for every homebuyer. Your title company can help you weigh the pros and cons of each option based on your specific situation and risk tolerance.

Enhanced title insurance offers comprehensive protection against a wider range of risks, including post-closing issues and automatic inflation coverage. At South Oak, our experienced title professionals can help you determine whether or not an enhanced policy is right for you. We can give you more detailed information about the differences in coverage and help you make an informed decision. Contact us today to learn more or request a quote.