The Difference Between Massachusetts Title Insurance and Owner’s Insurance
Suppose you are buying real estate in Massachusetts. In that case, you may be wondering what the difference between Massachusetts title insurance and owner’s insurance is and why you might need both types of coverage. Here’s a quick explanation to help you understand why you need each kind of coverage, which providers offer them, and what they protect against.
What is Massachusetts Title Insurance?
Title insurance is often misunderstood. This type of coverage doesn’t keep your home safe from things like fire or vandalism. Instead, it helps protect the home you purchase from issues with the title. It is an indemnification policy that protects you from financial loss if there are issues with the rights for ownership of the property.
Even though the closing attorneys will research the title and look for any discrepancies and issues, there may be hidden defects that go undetected. Four of the problems that title insurance usually takes care of are:
Known and unknown debts – When the previous owner used the property as security on a debt that’s been delinquent. Or when there are delinquent taxes or outstanding child support payments.
Forgotten heirs – someone who should have inherited the property (or interest in it) who never did. Legally, they may still own or share in the property.
Errors in the public record – years ago, courthouse staff might have recorded the title wrong; as a result, a title search won’t find the old lien.
Fraud – In the first instance, the previous owner never sold the house. Or in the second instance, the house was sold using the forged signature of one of the previous owners.
These things might be the basis for making a claim on the Massachusetts title insurance.
What is Massachusett’s Lender’s Title Insurance?
Most mortgage lenders require lender’s title insurance policies, and they are paid as part of the closing costs.
This type of coverage will typically be required to get a mortgage loan. That does not protect your investment in the home, however. If someone sues with a claim against your home, you will be the first responsible person. Massachusetts title insurance only covers claims that affect the lender’s loan.
What is Massachusett’s Owner’s Insurance?
Ownership of real estate is not as simple as owning other property types, like your car or personal belongings.
For example, if a previous owner didn’t pay off a second mortgage loan, the lender may still have a lien on the property. This means the lender may still claim ownership of part of the property to repay the debt.
Or what if a previous owner used the property as collateral for a business loan and never repaid it? The bank might own the property.
Furthermore, there’s the possibility that heirs of a previous landowner still have partial ownership but weren’t ever recorded as being such.
If these kinds of ownership disputes crop up, title insurance can’t do anything about them. But your title insurance policy may compensate you financially in the event someone else who says they own a share of your home equity comes forward.
You should remember that your mortgage lender does not want to risk and ensure your mortgage without providing title insurance. Neither should you.
Owner’s policies are optional, and they are paid for by the person buying the home, and they are collected as part of the closing costs. There are also comprehensive coverage policies available through many companies. These can provide added protection such as building permit violations, incorrect surveys, building encroachments, and pre-existing violations of zoning laws.
Having this added protection for your financial investment is a good idea. The price of these policies tends to be relatively low. It will provide you with the peace of mind you need.
What Is Homeowner’s Insurance?
Massachusetts title insurance and owner’s insurance are very different from homeowner’s insurance. Owner’s and homeowner’s insurance sound the same, but they aren’t.
The home insurance policy is a legal contract that provides certain types of protection for your home. As with most other types of insurance, you will pay premiums to the insurance company, and they will pay for losses outlined in the policy.
Although there is no legal requirement that says you need to buy a homeowner’s insurance policy, it’s a good idea. It will protect your investment from a wide range of different types of disasters that could strike your home, such as fire. The insurance means to help pay for damages to the property that are out of your control.
However, if you need to have a mortgage that will help you pay for your home, you will find that most lenders will not loan you the money unless you buy and maintain the homeowner’s insurance. After all, the lender is taking a risk lending the money to you. They need to know that the property is adequately protected. If you drop coverage, the lender could take action against you.
Even though the lender might require that you have homeowner’s insurance, they can’t tell you which insurance company to use. You can shop around to find the coverage that’s right for you, as long as it meets the lender’s requirements.
How Much Will Your Title Insurance Cost?
A title insurance premium is a one-time payment for title insurance, and there is a range of rates: some cost $300 while others go up to $2,000 or more.
The actual cost of title insurance depends on how much the property is worth, the insurer you get your coverage from, and where the home is located.
You pay for the coverage upfront, unlike other types of insurance policies like homeowner’s insurance or a home warranty.
After the one-time payment at closing, the title insurance is effective as long as you own the home.
Although owner’s title insurance is technically optional, experts strongly recommend buying this coverage.
Title issues can come out of nowhere at any time. And the one–time fee you pay for owner’s title insurance (around $850 on average) could protect the thousands of dollars you’ve paid into the home and built-in equity.
If you ever lost part ownership because of title problems, the additional title insurance premium you paid could erase your financial loss.
If you are a home buyer in Massachusetts, it is important to have both lender’s title insurance and owner’s title insurance. At Flynn Law & Alioth Title, we can provide you with the best options for title insurance in the state. We understand that buying a home is a huge investment, and our team is here to help make sure your investment is protected.
Contact us today to learn more about our title insurance offerings or to get started on your policy today!