When you purchase a home in Pennsylvania, the lender of your mortgage requires you to purchase title insurance to protect their investment in the property. Title insurance is only optional if you pay cash in full for your home. Many home buyers assume that this mandatory title insurance policy covers them if there is a problem with the title, but this is not true. It is for the lender and if there is a problem with the title, you do not have coverage to protect your interests.
You can also purchase an owner’s title insurance policy to protect your investment and property rights from future legal claims regarding ownership of your property. Enhanced title insurance is now the default owner’s coverage. Buyers who prefer standard title insurance can opt out of enhanced coverage by signing a waiver.
What Is Enhanced Title Insurance?
A title insurance policy covers the title of the home as of the closing date. Enhanced title insurance provides more protection against a wider variety of issues than a standard policy. Standard title insurance covers issues like mistakes in public records, unknown heirs claiming ownership of the property, fraud, and claims against your ownership of the property. Enhanced title insurance offers these protections in addition to covering issues such as subdivision violations, liens against the property, zoning issues, and encroachment of structures on your property.
Because enhanced title insurance is now the default, buyers who choose standard coverage instead are required to sign a waiver acknowledging that they are declining the additional protections. Most buyers choose not to sign the waiver because doing so leaves them with less coverage.
Why Does Enhanced Title Insurance Cost More Than a Standard Policy?
An enhanced title insurance policy costs more than a standard policy because it offers significantly more coverage. The enhanced policy itself costs approximately 10% more than a standard policy. Other associated fees may also be higher at approximately $400 compared with $150 for standard coverage. It also increases in value along with your home where the coverage of a standard policy remains the same.
Since enhanced title insurance is now the default, the decision for buyers is whether they want to waive the additional protection in exchange for the lower cost of standard coverage. Before signing a waiver, it is important to understand what protections you would be giving up.
If you have questions about title insurance, please contact your Zuber real estate agent for more information.