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Do California home buyers need basic or enhanced title insurance?

On Behalf of | Mar 4, 2022 | Real Estate Litigation

Real estate professionals often have to answer questions from their clients about title insurance. Some people think that the entire system is a scam because of how rarely people need to make claims against their coverage. Others just want to keep their costs as low as possible and may not like needing to pay for two separate fees when buying a home with a mortgage.

Given how many buyers are unenthusiastic about paying for even basic coverage, the idea that you should suggest an enhanced policy may make you cringe. However, enhanced policies offer protection and more situations than basic policies.

What does a basic title policy cover?

A standard or basic title insurance policy will protect an owner against improperly executed or recorded deeds, as well as certain deeds and unrecorded restrictive covenants. It can also protect against fraudulent deeds created before the closing.

A basic policy does not protect somebody from attempts at fraud that start after they assumed ownership of the property or against building permit violations. An enhanced title policy can cover issues that arise after closing, boundary encroachment and even access rights.

If the point of purchasing the title insurance is to fully protect someone’s property investment against the misconduct and fraud of others, then an enhanced policy is likely a better investment because it protects the buyer in more circumstances than a basic policy.

Title disputes often lead to expensive litigation

In addition to protecting someone from the loss of what they invest in a property, a title policy can help pay for their defense in court. Issues with the public record or fraudulent deeds often wind up in civil court.

Explaining the rare possible circumstances that would result in a title insurance claim could help your buyers decide what level of coverage is best for their situation. Keeping apprised of changes in real estate law and the court of public opinion can make you a better professional support for your clients. Understanding how different forms of title insurance protect against real estate fraud can also help.