The Importance Of Owner Title Insurance 2

Posted on December 16, 2019 by Nancy Liu | Category: Real Estate

Attorney Liu presented an article on how owner title insurance can prevent client A losing $400,000 from his property investment in the previous newsletter. However, many readers still do not understand. They wonder why they may still have a problem on their title since they already had a title insurance. Why do they need to buy the owner title policy? What is the consequence if they do not have this policy?

Lender title policy and owner title policy are two distinct insurance title policies. Although both insure a party against loss due to a defect title, the beneficiaries are totally different. The lender title policy insures the lender’s benefit, and the coverage amount is the same as loan amount. The owner title policy insures owner, and the coverage amount is the same as purchase price. Therefore, the buyer is not able to claim any lost under lender title policy. The following case clearly illustrates the difference between these two title policies.

Client B did not buy an owner title policy for his newly purchased house, which saves him a few hundred dollars. Half of Client B’s house was accidentally built on the neighbor’s private land by the constructor. The neighbor required Client B to demolish the house from his land. The lender of Client B immediately claimed under lender title policy from title insurance company once they noticed the problem. The title insurance company compensated the lender for the remained loan amount. Although Client B lost the fee simply (full title) ownership to his house due to the contractor’s mistake, Client B is still unable to claim any loss from the title insurance company. Client B has two options to get back the fee simply ownership to his house, either purchases the land occupied by his house from his neighbor, or pays a lawyer tens of thousands dollars for a lawsuit against the constructor. Either way costs him a fortune, plus plenty of trouble. Client B was stuck in a dilemma because of a few hundred dollar owner title insurance he wanted to save in the beginning.

This article is only for your reference. Please do not apply mechanically to any exact cases. You are welcome to consult our attorneys at Liu & Associates, P.C. For contact information, please click here.