There are two basic types of policies that provide title insurance coverage to owners of real property: the ALTA 2006 Owner’s Policy with Standard coverage and the ALTA 1987 Residential Owner’s Policy with Owner’s Extended coverage, OEC for short, or Plain Language coverage.
The ALTA 2006 Owner’s Policy with Standard coverage
This policy is issued to the owner(s) of either residential or commercial property and insures that the insured property is marketable. It insures against errors in deeds, forgery, fraudulent conveyances, mistakes in public records, and errors in estate proceedings that have happened prior to the closing of the transaction the title policy insures. (Remember, unlike other types of insurance, title insurance insures the past instead of the future.)
The ALTA 1987 Residential Owner’s Policy with Owner’s Extended coverage
or Plain Language coverage
This policy is a “plain language policy” intended to meet the requirements, emerging in some states, that consumer insurance policies be written in plain language.
This policy is issued on residential, single-family property only including single family houses, town houses, and condominiums and provides the same protections as the Standard coverage policy plus additional coverages that give the homeowner the same broader coverages previously given only to mortgagees.
Owner’s Extended coverage and Plain Language coverage provide these additional protections for the homeowner:
- Rights or claims of parties in possession.
- Easements or claims of easements not shown in public records.
- Forced removal of the existing structure, other than a boundary wall or fence, because it extends onto adjoining land or onto any easement, because it violates a restriction shown on Schedule B of the policy, or because it violates any existing zoning law.
- Mechanic’s Lien coverage for any lien, or right to a lien, for services, labor, or material furnished before the policy date, unless the insured agreed to pay for the labor and materials.
The 1987 ALTA Residential Owner’s Policy with Owner’s Extended coverage also provides inflation protection over the first five years of ownership, meaning that the policy amount automatically increases 10% each year for the first five anniversary dates of the policy at no additional charge to the owner. The 1987 ALTA Residential Owner’s Policy with Plain Language coverage does not provide inflation protection unless it is purchased through a separate endorsement.
When Land Title closes the transaction and records the documents, both the ALTA 2006 Owner’s Policy and the ALTA 1987 Residential Owner’s Policy also provide Gap Protection, insuring the homeowner against any defects, liens, encumbrances, adverse claims, or other matters appearing in the public records between the effective date of the title commitment and the recording date of the documents.
In order to provide an ALTA 1987 Residential Owner’s Policy, Land Title requires that a Final Affidavit and Agreement, stating that there are no liens, be signed by buyers and sellers at the time of closing. Generally, a new survey or ILC is not required unless the property being insured is new construction.
There are some exceptions to this rule, however, so see your Land Title Sales Representative for more information regarding a particular transaction.
Land Title provides Standard and Owner’s Extended coverage for policies underwritten by Old Republic and Land Title Insurance Corporation. If your Land Title office uses a different underwriter, you can obtain complete coverage information from your closer.
Below is a summary of coverages provided by the ALTA 2006 Owner’s Policy and the ALTA 1987 Residential Owner’s Policy. If you have any questions regarding the protection provided by each policy, please contact your Land Title account manager.
|Elements of coverage for the owner Owner's Policy Residential Policy||ALTA2006||ALTA1987|
|Claims of unknown heirs||Yes||Yes|
|Hidden incompetency of former owner||Yes||Yes|
|Rights of access||Yes||Yes|
|Errors in public record||Yes||Yes|
|Encroachment of main dwellings||No||Yes|
|Rights of others in possession of main dwellings||No||Yes|
|Violations of building restrictions by main dwelling resulting in attempt to or forced removal of the improvements||No||Yes|
|Zoning violations by main dwelling||No||Yes|
|Environmental Lien Protection for liens recorded or filed with the Clerk or the District Court||Yes||Yes|