In today's turbulent real estate market, questions regarding the necessity of owner’s title insurance (or what is sometimes referred to as an “owner’s policy”) is the most frequent one we get. If you have recently bought a home, or are in the process of doing so, you might have heard some discussion about this kind of policy, but you probably are not aware of the protection it can give to you.
So what benefit does an owner’s policy actually give you? Perhaps the best way to explain this is to describe what might happen if you don’t have a policy: if a legal claim is made against property you have purchased, and you have not purchased an owner’s policy, you will have to defend the claim out of your own pocket. The most common claims take the form of either an unresolved debt of a previous owner of the property or the failure of a previous owner to properly transfer the deed to a subsequent purchaser. So in addition to any fees you will pay in this case, should you lose this legal battle, one or both of the following outcomes can occur: (1) you can lose title ownership of the property, which might also cause you to lose any equity interest in the property you have developed, and/or (2) you could still owe the lender for all of the money you borrowed. Either of these outcomes would clearly become a massive financial nightmare to you and your family.
It is true that an owner's policy is optional coverage, and it might appear that this might be an additional expense that you can avoid. But while we all suffer through the effects of this nation’s "credit crunch", many entities consider this type of policy crucial. First, if you buy a home in the Louisville area and you are utilizing documents prepared by the Greater Louisville Association of Realtors, you will notice that the language in these documents advises all buyers to purchase an owner’s policy. Furthermore, an alternate form of this type of policy is a lender’s title insurance policy, and almost every lender or bank today requires that you purchase a lender’s policy on their behalf to afford them the same protection that an owner’s policy gives to you.
Therefore, under these circumstances, an owner's policy is certainly a reasonable cost in this light. It is a one-time premium, and the coverage you purchase will protect you forever. For a full review of specific owner policy provisions please contact this office and an example copy of a policy can be sent to you for your review. The Rounsavall Title Group can issue this policy to you when you close on your property in our office, and we can even provide you with a policy should you decide to close elsewhere. For more information about these policies and their effects, please call us and we’d be happy to discuss it further with you.