Owner’s Policy in Title Insurance: A Comprehensive Guide

Introduction

Title insurance plays a crucial role in real estate transactions, protecting the interests of property owners and lenders. One of the critical components of title insurance is the Owner’s Policy, which provides coverage specifically for the property buyer. This article delves into the intricacies of an Owner’s Policy in title insurance, highlighting its purpose, benefits, coverage details, and differences from a lender’s policy.

Understanding Title Insurance

Title insurance is a form of indemnity insurance that protects against financial loss from defects in title to real property. Unlike other types of insurance that protect against future events, title insurance protects against past events that may affect the title. These could include issues like unpaid taxes, liens, or fraud.

There are two primary types of title insurance policies: the Owner’s Policy and the Lender’s Policy. While both serve to protect interests in the property, they cater to different parties involved in the transaction.

What is an Owner’s Policy?

An Owner’s Policy is designed to protect the property owner from potential losses arising from defects in the title that were not discovered during the closing process. When a buyer purchases a home, the Owner’s Policy covers the entire property value. This policy remains in effect for as long as the owner or their heirs are interested in the property, offering long-term security.

Key Features of an Owner’s Policy

Coverage Against Title Defects: The Owner’s Policy protects the owner from various title defects, such as:
- Undisclosed liens: If any claims against the property were not revealed during the title search.
- Fraud or forgery: Coverage against instances where a previous owner may have forged signatures or misrepresented ownership.
- Easements and encroachments: Issues related to the use of the property, such as rights of way or encroachments from neighboring properties.
- Errors in public records: Mistakes in the records maintained by the county or local government that could affect ownership rights.
Legal Defense Costs: If a claim is made against the title, the title insurance company will defend the owner in court, covering legal fees and related expenses, even if the claim is without merit.
Transferability: The policy can be transferred to a new owner in the event of a sale, which can add value to the property.
One-Time Premium: The premium for an Owner’s Policy is typically paid as a one-time fee at closing, making it a cost-effective way to secure protection for the life of the ownership.

Benefits of an Owner’s Policy

Peace of Mind: Owning a home is a significant investment, and having an Owner’s Policy provides peace of mind, knowing that potential title issues are covered.
Protection for Heirs: The policy protects heirs in case of the original owner’s death, ensuring they inherit the property without the burden of undisclosed title issues.
Increased Marketability: When selling a property, having an Owner’s Policy can make the transaction smoother and more attractive to potential buyers, who can have confidence in the title.
Financial Security: An Owner’s Policy protects against significant economic losses from title defects, potentially saving owners thousands of dollars.

Owner’s Policy vs. Lender’s Policy

While both the Owner’s Policy and Lender’s Policy protect against title issues, they serve different purposes:

Owner’s Policy:
- Protects the property owner.
- The coverage is based on the purchase price of the property. It remains valid as long as the owner is interested in it.
Lender’s Policy:
- Protects the lender’s investment in the property.
- The coverage amount is based on the loan amount. It typically only remains in effect until the loan is paid off.

Buyers must understand that while lenders often require the Lender’s Policy when financing a home, the Owner’s Policy is optional but highly recommended.

When to Obtain an Owner’s Policy

During Home Purchase: Most homebuyers obtain an Owner’s Policy at closing. It is often offered as part of the closing costs.
When Refinancing: If a homeowner refinances their mortgage, obtaining a new Owner’s Policy may be wise, primarily if the existing policy was issued many years ago.
Inherit Property: If an individual inherits property, obtaining a new Owner’s Policy may be necessary to ensure coverage against title defects.

Conclusion

An Owner’s Policy in title insurance is a critical safeguard for homeowners, offering protection against potential title defects and ensuring peace of mind throughout property ownership. Buyers can make informed decisions during their real estate transactions by understanding the features and benefits of an Owner’s Policy. While the cost is typically a one-time premium, the financial protection and security it offers can be invaluable in the long run. Ultimately, investing in an Owner’s Policy is a wise decision for anyone looking to protect their investment in real estate.

Provider and Settlement Service	Charge or Range of Charges
Sonic Realty LLC	1%-6% of purchase price
Sonic Title Agency, LLC	Title Insurance Policy: $950 - $1706 on a $250,000 property. (Rates vary and are dependent on the state, selling price, and loan amount on the property.) Title Search Fee: $250 - $325 (where applicable) Closing Fee: $450 - $650
Sonic Loans Inc. This company provides various real estate mortgage loan origination activities either as a third-party originator or a mortgage broker, including loan pre-qualification, competitive bid process (when providing third-party origination services), loan origination, loan pre-approval, loan structuring, processing, and closing.	Loan Origination Charge: 0-3 % of loan amount (may include 3^rd party fees) Loan Discount Fee/points: 0.5%-6% of loan amount. Application/Processing Fee: $0.00 - $875.00 Flood and tax service: $0.00 - $95.00 Underwriting Fee: $0.00 - $1295.00 Document Review Fee: $0.00 - $400.00 Appraisal Fee: $0.00 - $850.00 Credit Report Fee: $0.00 - $135.00 Actual charges may vary according to the particular lender selected, the particular services provided, and the underlying transaction, borrower selections, etc. Some or all of these fees may be charged by third parties and/or the Member Mortgage Lender/Mortgage Broker. The Member Lenders and Mortgage Brokers have agreed to pay a fee ranging from 0.5% to 2.75% of the loan amount to Sonic Loans in connection with a range of loan origination services provided by Sonic Loans to the Member Lender/Mortgage Broker. The fees are paid either directly to Sonic Loans by the Member Lender/Mortgage Broker or billed directly to you at closing.

Provider and Settlement Service	Charge or Range of Charges
Appraisal Fee	$0-$800
Credit Report Fee	$63-$125