Have you ever been caught in a rainstorm? Imagine it’s a beautiful fall day, the air is crisp, and you are out for a walk in your new suede coat. Out of nowhere, the sky opens. Rain falls in buckets. You didn’t bring an umbrella and there is nothing to duck under – it’s just you and the sky – no protection from the unseen or unanticipated. You are drenched and your new coat is ruined!
Storms can be elusive. In many cases, it can be hard to predict exactly when and where a storm will strike. But good preparation is the greatest defense.
Title insurance serves as protection of your investment in a piece of property. In this scenario, title insurance can serve as a needed umbrella in a storm when a title defect comes falling from the sky.
But choosing the right title insurance policy to protect yourself can make all the difference.
- Loan (or Mortgage) Policy: When purchasing a piece of property, most lenders require a Loan (or Mortgage) Policy. This type of policy protects the lender’s interest only and is based on the loan amount. The amount of protection decreases as the loan is paid off. Once the loan is paid in full, the Loan Policy disappears entirely.
- Owner’s (or Fee) Policy: Conversely, an Owner’s (or Fee) Policy protects the homeowner’s investment and is based on the purchase price. This amount of protection stays the same and continues to protect for the duration of time in which the homeowner or their heirs own the property.
Many homeowners are surprised when they learn that while a Loan Policy is most always required, the Owner’s Policy is optional. Again, the Loan Policy protects the lender (required) and the Owner’s Policy protects you (not required)!
So, why should you spend more money on title insurance when your list of closing expenses is already approaching critical levels?
Well, if you had your umbrella that day you were caught in the rainstorm, you would have protected yourself and your fancy new coat! No harm, no foul.
Unfortunately, the same isn’t true if you were holding your lender’s umbrella. You may feel safe and protected by your lender’s Loan Policy, but if a title defect arises you will find that your lender’s policy doesn’t protect you from one drop of rain, let alone an entire rainstorm.
Don’t allow yourself to close on property without an owner’s title insurance policy. Maverick can help – just reach out.
