3 Dangers in Declining Owner’s Title Insurance

homeowners title insurance

Sometimes when making large purchases, for better or worse, our instincts kick in, and we begin looking for ways to save money. Maybe we don’t need that vacation we were planning this year. Perhaps we can hold off on that new car purchase for a few more years. Maybe we don’t need the owner’s title insurance since the bank already has a policy. Taking these steps may help you feel better about your large purchase, that is, until you start seeing the consequences of your choices.

We all know how it feels to postpone that vacation or car purchase. Most of us will revisit the purchase when it makes more sense because we like our vacations and new cars. When not purchased upfront, title insurance can be quickly forgotten in a sea of financial responsibilities that most homeowners already deal with. While adding the coverage might be generally accessible, adding it just before you need it is a trick few will succeed at and most should never attempt.

1. You Can’t Add Coverage After You Discover a Problem With the Title

Some people are under the impression that they can add an owner’s title insurance policy when they need it. Unfortunately, fortune does not favor the unprepared when it comes to insurance. There is a concept in the insurance world related to an imminent threat. An imminent threat is when you realize something terrible is about to happen. Some examples of this would be a wildfire headed toward your home or receiving a terminal diagnosis from your doctor.

The problem is that insurance carriers prevent you from adding coverage for an imminent threat. A homeowner can’t add the home insurance they didn’t purchase when a fire is in the vicinity. Likewise, you cannot buy a life insurance policy after you are diagnosed as terminal. It’s the same with title policies. Add the insurance at the time of purchase to avoid getting caught in an imminent threat situation when you need it but can’t buy it. As a trusted title insurance agency in New Jersey, we will walk you through these important details.

2. Problems With Your Bank’s Title Coverage

When a bank lends you money for a property transaction, they make you pay for a title insurance policy to protect their interest in your loan. The bank’s policy protects the bank that’s only interested in insuring the amount of money they lend you.

So, if you borrowed $100,000 on a $500,000 piece of property, the bank’s policy only covers the $100,000 they lent to you. Additionally, as you pay the loan down, the value of insurance coverage decreases. Also, and here’s the kicker, when you pay off the loan, the policy is canceled and no longer protects you or the bank. This is why you need an owner’s title insurance policy in addition to the bank’s title policy. You need coverage for the property’s full value for as long as you own it.

3. Don’t Plan On Self-Insuring Your Title

If you’re planning on self-insuring, here are a few reasons why you should not, no matter how wealthy you are. Self-insuring is another way of saying you are not interested in purchasing a title insurance policy. You take on all the possible risks to avoid paying a little money upfront. While you may save some money, here’s what it could cost you if there’s a future issue with your title:

You could be on the hook for thousands of dollars in court costs amassed while trying to correct your title. A title insurance policy covers the court costs for you. You may have to make financial reparations to the other party as you clean up the property title. This could be a problem a few thousand dollars will solve. It could also be a much more significant issue requiring tens or even hundreds of thousands of dollars to remediate. Spending a few hundred dollars upfront starts to make sense when you’re forced to pay legal fees and reparations to the other party. Do yourself a favor, and don’t skip the owner’s title insurance policy!

At Cortes & Hay, we have been explaining the benefits of owner’s title insurance for many years. We have seen what it can do for you when things go wrong with a property title. We invite you to take full advantage of our 50+ years of providing banks and property owners with title insurance policies to protect property sales across the great state of New Jersey. Get in touch with us today if you have questions or would like to get started.