Divorce impacts your life in many ways, but one of the most noticeable ways you’ll be impacted is when it comes to asset and property division. If you hold commercial property, even if it is solely in your name, it will be factored into a division of assets, and even if you end up keeping the property, the divorce could cause issues for your title insurance policy. With that in mind, we want to take a closer look at how your title insurance policy could be affected by your divorce.
Divorce And Title Insurance Responsibilities
As we’ve talked about at great lengths on our blog, title insurance is a form of protection in the event that someone makes a title claim on your property. Perhaps a long-lost heir comes out of the woodwork, or incomplete documentation eventually reveals that there was an outstanding tax lien on the property. These past issues could become your problem if you don’t have title insurance.
Title insurance comes in two different forms - an owner’s title policy and a lender’s title policy. An owner’s title policy protects you, the owner, for as long as you own the property, whereas a lender’s insurance policy protects your mortgage lender in the event of a valid claim. Most lenders require that a property buyer purchases a lender’s title insurance policy in order to be granted a loan. In other words, a lender’s policy is usually required, whereas an owner’s policy is highly recommended for the buyer, but not required. Unlike health insurance or automobile insurance that require multiple payments each year, these title policies can be secured for a one-time payment, making them a savvy financial choice.
So how does divorce impact your title insurance policy? Let’s start by looking at your owner’s policy. If the commercial property is in your name, and you’ll be keeping the property following the divorce, not much will change. You will be able to keep that policy in place since the property is not changing hands, and you can talk with your title insurance provider to have them remove your ex as a named beneficiary on the policy if that is agreed upon during the divorce.
However, the same doesn’t typically hold true when it comes to your lender’s title insurance policy. While owner’s title insurance protects you for as long as you own the property, lender’s title insurance provides coverage for as long as you hold the original mortgage. That means a married couple who is refinancing their loan or a divorced couple who is refinancing in order to remove one party from the mortgage obligation will run into the same issue. Refinancing closes out your original loan and another loan is originated, meaning you’ll need to secure another lender’s title insurance policy specific to that mortgage.
If you need help with any aspect of commercial asset division or assistance securing title insurance, connect with the team at Commercial Partners today at (612) 337-2470.