Title insurance is a crucial component of the real estate transaction process, designed to protect buyers and lenders from potential ownership disputes, claims or hidden defects in the property’s title. However, residential and commercial properties have distinct characteristics and unique risks, necessitating different types of title insurance. What are the differences between residential and commercial title insurance?

Coverage

Residential title insurance is primarily designed for single-family homes, condos and small multi-unit dwellings, typically with 4 or fewer units. Residential title insurance policies protect the homeowner and the mortgage lender from any title defects, liens or disputes that may arise after the purchase.

Commercial title insurance, on the other hand, is tailored for larger and more complex real estate properties such as office buildings, retail centers, industrial properties and multi-unit apartment complexes. Commercial title insurance policies offer protection to both the property owner and the lender, safeguarding them against any title issues that may arise during or after the transaction.

Premiums

The cost of residential title insurance is lower than commercial title insurance, simply because the coverage is more straightforward and there are fewer risks associated with residential properties.

Meanwhile, commercial title insurance typically commands a higher premium due to the increased complexity of coverage and potential for larger financial stakes and payouts to cover title defects.

Duration

Residential title insurance provides coverage for as long as the property owner (or their heirs) hold an interest in the property, offering peace of mind for the long term. Unlike other types of insurance though, title insurance is a one-time premium with long-term coverage.

Commercial title insurance can be tailored to specific needs, with options for short-term policies or policies that cover future property transactions, depending on the terms of the agreement. A title company can identify the types of coverage that may be necessary for a specific property.