Title insurance is a common confusion for MA home buyers. There are two types of title insurance referenced in closing documents. The first is lender’s title insurance and the other owner’s title insurance. Lender’s title insurance is required when you are using a mortgage to purchase a home. Owner’s title insurance, however, is optional. The MA owner’s title insurance facts below will help you decide whether you should purchase owner’s title insurance for your home purchase.
What is Title Insurance?
Title insurance is often mixed up with title searches. Title searches are performed by your closing attorney to ensure that that are no obvious issues with the change of title on the property from one owner to another over the past 30-50 years. Although everything may be seemingly clear, unforeseeable issues could arise that jeopardize your ownership rights. This is where title insurance comes into play.
What Title Insurance Covers
Title insurance covers a wide range of title defects that may result in a party claiming ownership to your home or that may otherwise threaten your ownership rights. Below are a few examples.
- Identity Fraud
- Sellers Being Pressured to Sign Documents
- Incorrect Seller’s Marital Status
- Typos in Recording of Documents
- Invalid Powers of Attorney in Execution of Documents
- Signatures by Under-aged Parties
- Signatures by Individuals of Questionable Mental Capacity
- Inconsistent Recording or Indexing of Documents at the Registry of Deeds
- Deeds Delivered After a Seller’s Death
What Title Insurance Does Not Cover
It is important to note that title insurance does not cover every possible scenario or issue. A few examples of defects that are commonly not covered are below.
- Issues with Execution of Wills
- Claims by Previously Unknown or New Heirs
- Incorrect Property Legal Descriptions
- Issues with Land Surveys
- Incorrect Trust Interpretations
- Problems with Identical Names
Difference Between Lender’s and MA Owner’s Title Insurance
Both you and your mortgage lender have an interest in the property. Lender’s title insurance protects the amount loaned to you (and still owed to them). Owner’s title insurance would protect your equity interest. Lenders require that you purchase the policy protecting their interest, but the option is your whether to protect your equity.
What’s the worst case scenario if you don’t have owner’s title insurance? First and foremost, you could incur hefty legal fees to defend your ownership rights. If you lose the case, you could lose your home. Your lender would be paid what they are owed, but you would receive nothing for your equity.
Should You Buy MA Owner’s Title Insurance?
Like any insurance policy, there’s no way to know whether you will ultimately need it. These situations are unpredictable. Given the value of your real estate investment, the risks are pretty high. Many home buyers purchase MA owner’s title insurance for peace of mind. The cost is typically minimal compared to the price of your home.
MA owner’s title insurance need only be purchased once and will cover you the entire time that you own the home. You do not need to purchase a new policy when refinancing, although it may be offered to you. Be sure to inquire about which types of title defects are covered, and more importantly, which ones are not, as every title insurance policy differs. Consult with your closing attorney for any questions or concerns that you may have. You may decide at closing whether to purchase a MA owner’s title insurance policy.