How Do Owner’s Title Insurance Policies Work in Washington?

We’ve covered the concept of title insurance in the past, from a who-pays-what perspective.  But home buyers in Washington tend to have a lot of questions about this subject. So today, we will drill down and focus on the owner’s title insurance policy, in particular.

Here’s what home buyers in Washington should know about owner’s title insurance policies and the important protections they provide.

What is an owner’s title insurance policy?

An owner’s title insurance policy is a type of insurance that protects a home buyer from what are known as “title defects.” A title defect is any issue that could affect the buyer’s ownership of the property, such as a lien, mortgage, or easement.

When you buy a home in the state of Washington, you’re also buying the legal right to own the property. This right is documented in a deed, a legal document that transfers ownership from the seller to the buyer.

But even if the deed is in order, there may be other title defects that are not revealed by a simple title search. An owner’s title insurance policy protects you from financial losses you might incur as a result of such defects.

For example, if someone comes forward after you buy the property and claims that they own it, the title insurance company would pay some or all of the costs required to resolve the problem.

In the state of Washington, title insurance is a one-time cost that’s typically paid at closing. The cost of the policy will vary depending on the property’s value and the type of title insurance that you purchase. The policy will protect you for as long as you own or have an interest in the home.

What do these policies cover?

Just like any other type of insurance, your coverage can vary depending on the type of policy you purchase and the clauses it contains. But in most cases, owner’s title insurance in Washington will cover some or all of the following issues:

• Ownership Issues: Protection against claims challenging your ownership of the property due to errors, omissions, or fraud in the title documentation.
• Forgery and Fraud: Coverage for losses resulting from forged signatures on the title or fraudulent transactions affecting the property’s ownership.
• Unpaid Liens and Mortgages: Coverage for unpaid debts, liens, or mortgages attached to the property, which could otherwise lead to the property being sold to cover these debts.
• Missing Heirs and Undisclosed Wills: Protection against claims from missing heirs or undisclosed wills that could affect the property’s ownership.
• Boundary and Survey Disputes: Coverage for boundary disputes, encroachments, or conflicting surveys that might affect the property’s boundaries.
• Public Record Errors: Protection against errors or discrepancies in public records that could impact the property’s ownership or rights.
• Invalid Deeds: Coverage for issues related to defective deeds, such as improperly executed deeds or deeds from parties lacking legal capacity.
• Defective Titles: Coverage for issues arising from unmarketable or defective titles that make it difficult to sell the property.
• Easements and Rights of Way: Protection against claims related to easements or rights of way that could limit your property’s use.
• Zoning Violations: Coverage for losses resulting from zoning violations that affect the property’s use or value.
• Clerical and Filing Errors: Protection against errors made during the title search or recording process that could impact the property’s ownership.
• Prior Undisclosed Mortgages: Coverage for mortgages not disclosed during the purchase process that could affect the property’s ownership.
• Ownership by Minors or Incapacitated Persons: Protection against claims from minors or incapacitated individuals that could impact the property’s ownership.
• Title Examination and Attorney Fees: Reimbursement of costs incurred for defending your title and resolving title-related issues.

Is owner’s title insurance required in Washington?

An owner’s title insurance policy is optional in most states, including Washington. But it’s definitely worth considering when buying a house.

Mortgage lenders often require borrowers to purchase a lender’s title insurance policy, which protects the lender’s interest in the property. But they usually don’t require borrowers to purchase an owner’s title insurance policy.

There are a few reasons why you might want to consider purchasing an owner’s title insurance policy. You can enjoy peace of mind from knowing you’re protected from title defects. It could also save you money in the long run, in the event of a legal dispute.

What’s the difference between owner’s and lender’s title insurance?

The main difference has to do with who they protect. Owner’s title insurance protects the buyer of a property from title defects, as explained earlier. Lender’s title insurance, on the other hand, protects the lender that loans money for the purchase of the property.

Mortgage lenders often require borrowers to purchase a lender’s title insurance policy, since the lender has a large financial stake in the property. But the owner’s policy is optional. The main point here is that they are two different policies that offer different kinds of protection.

Who pays for it?

In Washington state, the seller typically pays for the owner’s title insurance policy. However, the buyer and seller can negotiate who will pay for the policy. Like many aspects of a real estate transaction, this is fully negotiable.

According to the Washington State Insurance Commissioner’s Office:

“To protect your interest, you can choose to buy an owner’s title policy for the full price you paid for the property. Generally, most sellers pay for the owner’s policy.”

How much does owner’s title insurance cost in Washington?

The cost of owner’s title insurance in Washington can vary depending on the property’s value and other factors. But it usually falls somewhere between 0.5% and 1% of the property’s value. It’s a one-time cost paid at closing.

For example, if you buy a home in Washington for $500,000, you might pay somewhere between $2,500 and $5,000 for owner’s title insurance.

The type of policy you purchase can also affect the cost. There are two main types of title insurance policies: standard and extended. A standard policy protects you from the most common types of title defects, while an extended policy covers rare defects as well. Extended policies typically cost more because they offer broader protection.

Does it cover boundary or property line disputes?

The short answer is: it depends.

Boundary disputes are a type of title defect, but they’re not always covered by owner’s title insurance. If this is a specific concern for you, you’ll want to read through the policy to see if it’s included and what type of protection is offered.

You might even need to purchase an extended policy to have it include property line disputes. Extended policies usually cover boundary disputes caused by errors in the survey or by fraud.

But again, all of this can vary from one insurer to the next. So be sure to ask plenty of questions and read all of the fine print.

Note: This article explains the basic concepts relating to owner’s title insurance policies in the state of Washington. It is intended for a general audience, so portions of this article might not apply to your situation. Your insurance provider will be able to answer any questions you have about coverage specifics.