Enhanced Title Insurance Provides An Extra Layer of Protection for Property Owners
Most title insurance policies are pretty comprehensive, but they still don’t cover every risk that could put your property in legal or financial jeopardy. That’s why some property owners opt to purchase an enhanced owner’s title insurance policy, which, while more expensive, can protect against a variety of additional threats to your property’s title.
Enhanced Title Insurance: What Does It Actually Cover?
Enhanced owner’s title insurance covers a variety of potential title issues, including mechanic’s liens, zoning issues, forced structural removal, property appreciation, and transfer to heirs and trusts.
MECHANIC’S LIENS: A HIDDEN RISK COVERED BY MANY ENHANCED TITLE POLICIES
Many forms of enhanced title insurance cover mechanic’s liens, which are claims against a property filed by unpaid contractors or subcontractors who have done work on the property. For example, if the previous owner of a home had remodeling work done a few months before closing, but failed to pay their general contractor (or the general contractor failed to pay a subcontractor), they could file a mechanic’s lien against the property and the new owner could be forced to pay. If they refuse, the lien holder could take them to court and attempt to sell the home in order to repay the debt.
FORCED STRUCTURE REMOVAL: ANOTHER RISK OFTEN COVERED BY ENHANCED TITLE POLICIES
In some cases, a title or zoning issue can lead to the forced removal of a property due to a court order, often by a state or local government or an aggrieved party. Many forms of enhanced title insurance can protect against this when:
- A structure encroaches on another property or an easement
- A structure is in violation of zoning regulations
- A structure is in violation of permit regulations
YOUR PROPERTY IS INCREASING IN VALUE: BUT IS YOUR TITLE INSURANCE POLICY?
While the value of your property may go up year after year, in most cases, the value of your title insurance policy will not. Instead, the amount of coverage will stay fixed at the amount for which you purchased the property. That could cause a serious coverage gap if your property value has increased, or appreciated, significantly. In comparison, many enhanced title policies increase along with the value of your property. That way, you can stay protected, even if the value of your property doubles, triples, or quadruples over the time you own it.
ENHANCED TITLE POLICIES TRANSFER TO HEIRS, TRUSTS, AND OTHER BENEFICIARIES
If you plan to leave your property to your heirs, including your children and other relatives, your title insurance might not transfer to the new owners. However, many enhanced title policies do transfer, so you can rest assured that your heirs are receiving the same degree of title protection that you are. Plus, if you decide to transfer your property into a trust for tax purposes or to make charitable contributions over time, most enhanced policies will still protect your property, despite the change in ownership.
What Else Does Enhanced Title Insurance Cover?
In addition to covering mechanic’s liens and forced structural removal, enhanced owner’s policies can also cover:
- Post policy forgery
- Post policy adverse possession (may already be covered in many policies)
- Boundary and fence encroachment issues
- Unrecorded easements or leases
- Building setback violations
- Rent for substitute facilities (which may be important for commercial property)
ENHANCED OWNER’S POLICIES VS. ENDORSEMENTS: WHAT’S THE DIFFERENCE?
Enhanced owner’s policies and title insurance endorsements both add additional coverage to a title insurance policy– so what’s the difference? Well, not much, except for the fact that an enhanced owner’s policy is usually much more comprehensive, and covers a variety of different areas, while an endorsement usually only adds endorsements for a specific area, such as zoning or mechanic’s liens.
To learn more about how enhanced title insurance can help protect your property, consult with the experts at Sterling Title Partner for a free consultation.