When we look at title policies, there are different types of coverages offered by title companies. Figuring out which one is the best option in your particular situation often depends on each individual case, your budget, and the importance the abstract of title is to you. For instance, purchasing the home that your parents built, where you grew up in leaves little room for title disputes. However, if you are buying a home built in the 1900s, a correct and accurate abstract of title is more important given the number of owners that home had since it was built. There is where we see the difference between standard coverages or extended coverages.
Talking about the American Land Title Association’s variant of title policies, however, we get the most thorough coverage available. The American Land Title Association (ALTA) works to improve industry forms used throughout the country and clarify how these forms are used to benefit all parties involved.
An ALTA title policy is a title insurance form used by title insurers across the US. The ALTA title policies are divided into two categories: owner’s title insurance and lender’s title insurance. The first protects the owner, while the second protects the lender.
The Owner’s Policy
The owner’s title insurance coverage is for the amount of the property’s purchase price. Once active, the Owner’s Policy will be effective for however long the owner or their heirs have an interest in the property. As the policy is completed only after assessments of potential risks to the policy are finalized, the policy will pay any claims and the cost of defense against title attacks.
The Loan Policy
The lender’s title insurance coverage is for the mortgage amount, and it decreases as the mortgage debt is reduced. The Loan Policy’s role is to ensure the lender of their mortgage’s legitimacy, importance, and enforceability.
ALTA title policies aren’t standardly applied by everyone in every state. There are local variants of title policies that can be cheaper and with slight coverage differences. To give an example, the California Land Title Association (CLTA) opts for not covering liens, taxes, assessments, defects, easements, encumbrances, and others that are not available in the public records. They also do not request property surveys or inspections in order to discover issues that the property might have and the risks associated with them.
Getting title insurance isn’t standardized either, leaving either sellers to purchase the title policy for the buyers, both loan and owner’s policies being emitted simultaneously, or the buyer is left demanding and paying for the owner’s policy separately.