What is an Owners Policy?
An Owners policy is title insurance policy that protects purchasers of real estate against loss resulting from a defect in title if the status of the title to a parcel of real property is other than as represented by the seller. If the insured suffers a loss as a result of title defect. the title company will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy.
To simplify the the explanation of what a title insurance policy will cover, title insurance will:
• PROTECT THE INSURED FROM FINANCIAL LOSS due to covered claims that may be asserted against the title to the real estate, up to the face amount of the title policy
• PAY LEGAL COSTS if the title insurer has to defend the title to real estate against a covered claim
• PAY ALL SUCCESSFUL CLAIMS against the title to the real estate covered by the policy, up to the face amount of the policy.
A title insurance policy will cover claims arising out of title problems that could have been discovered in the public records, and also cover claims for defects that could not be discovered in the record, even with the most complete search.
Some of the past problems that have been covered by title insurance include:
• FALSE IMPERSONATION
• FORGED DEEDS
• DEEDS BY PERSONS OF UNSOUND MIND
• DEEDS MY MINORS
• INVALID DOCUMENTS
• INVALID DEEDS
• DEEDS WITHOUT SPOUSE JOINTLY SELLING
• FRAUD
• LIENS FOR UNPAID ESTATE INHERITANCE AND GIFT TAXES
• UNRECORDED EASEMENTS
• UNDISCLOSED HEIRS OF FORMER OWNERS
Without title insurance these problems become the problems of the property purchaser and could cause significant financial loss.
A title insurance policy will not only protect the insured owner, but also that person’s heirs for as long as they hold title to the property, and even after they sell by warranty deed. The Company will not only satisfy any valid claim made against the insured’s title, but it will pay for the costs and legal expenses of defending against a title claim.
The amount of insurance for the Owners Policy is based upon the full consideration (generally the sales price) of the real estate; however, the buyer may choose to obtain a greater amount of insurance by paying the appropriate premium based on the larger insurance amount. Buyers usually ask for more insurance when they expect the value of the real estate to increase dramatically in a short period, especially when the buyer plans on making significant improvements to the real estate, thereby increasing its value.
If a property purchaser is obtaining a purchase money loan when buying the property, most primary mortgage lenders will require a Loan Policy when they make a loan. This is a separate policy that is usually paid for by the borrower but provides no protection for the property purchaser. For the purchaser to obtain title insurance, a separate Owners Policy must be issued.
In Pennsylvania, the title insurance rates allow for “simultaneous issue” policies, meaning that both the lender and the owner can a receive title insurance policy for the one price; almost like a buy one - get one free program. The insurance premium is based on the policy with the greater amount of insurance, however with many loan programs lending up to 100% of the purchase price of the property, the difference in premium for the owners coverage is almost negligible. Pennsylvania does not require the purchaser to obtain a Title Insurance policy, however, Pennsylvania Insurance laws do require the purchaser to sign a "Waiver of Owners Title Insurance" form if the purchaser pays for a Lenders policy but chooses not to obtain an Owners Policy.
There are two kinds of Owners Policy coverages available for residential property in Pennsylvania; the more comprehensive "Enhanced Policy", and the "Standard Policy" that provides less coverage but has a slightly lower premium. Because the standard policy will provide less coverage, Liberty Bell Agency will ask for the specific acknowledgement of the type of policy desired by the purchaser of a residential property. For a comparison of the two kinds of policies, click the link below:
Enhanced -vs- Standard coverages
The title insurance policy form used in Pennsylvania is a modified version of the 2006 American Land Title Association (ALTA) policy form. This modified version of the 2006 ALTA policy form has been adopted by the Title Insurance Rating Bureau of Pennsylvania and approved for use by the Pennsylvania Insurance Department. The policy form primarily consists of three or four parts: Schedule A; Schedule B; Schedule BII, and the policy jacket.
To view a sample of the Owners Policy forms and review some additional details regarding the various parts of the policy, click on the appropriate links listed below:
The Policy Jacket - Standard Policy
The Policy Jacket - Enhanced Policy
Schedule A
Schedule B – Exceptions
Schedule B-II