Title Tip: How to Extend Coverage Under an Owners Policy

Your title policy never expires! How great is that? However, as with all Insurance product’s, there are situations in which coverage can be invalidated. This generally occurs with an Owner’s Policy when the insured changes title. Homeowners often transfer their property to a Family Trust, or an LLC. When this happens, coverage under the title policy is invalidated, because the policy is limited to cover a natural person, or the names shown on schedule A only.

To extend coverage, a home owner simply needs to ask for an endorsement to their policy. If they had a “Homeowner’s Policy” issued by First American Title Insurance, they can purchase a “Deletion of Natural Person” endorsement (DNP), that allows them to transfer the coverage under the policy to their Trust or LLC, as long as they are the only principles. If they had an “Owner’s Policy” or “Homeowner’s policy” issued by any other underwriter, they can purchase a CLTA 107.9 endorsement (additional insured). This allows them to add another name to their title policy coverage, such as a son, or a spouse being added to title after the purchase. If they use this endorsement to add an entity, they must be the only principles.

For example, John Doe and Jane Doe are the original insured under a “Homeowner’s Policy” issued by First American Title, and they deed their property to J&J Doe LLC. If they purchase the DNP endorsement, and they are the principles of J&J Doe LLC, then J&J Doe LLC is now covered under that same policy.

The important thing to remember in these situations, is that these endorsements are not intended to facilitate the extension of coverage for any type of purchase transaction. That’s why the original owners must be the sole principles of any entity. This endorsement will not extend coverage to an entity in which John and Jane Doe are principles with any other individual. Its meant to help ensure coverage is not invalidated for the original insured should they choose to create a Trust, or a business entity. If the property is sold, a new policy must be purchased.