What is Title Insurance, and Do I need It?
Title insurance is an insurance policy protecting against loss should the condition of title to land be other than what is insured. When you buy a home, you expect to enjoy certain benefits from ownership. You want to occupy the property as you wish, be free of debts and obligations not created or agreed to by you and be free to sell or seek a loan based on your ownership. Property insurance covers these rights.
As a result, title insurance is highly recommended by those associated with the real estate field (brokers, attorneys, etc.).
For a one-time low cost, a buyer can get a policy that protects them in the unlikely event that their property/ownership is challenged. Beyond this, mortgage lenders require clients to obtain title insurance.
Some mistakenly believe (particularly in new developments/communities) that the builders must have had valid title for them to build numerous homes in a community. While this is the case in the vast majority of cases, it is not always true. There have been instances where years passed, and the builders were long gone, when a title challenge was launched. This leaves the individual liable were it not for his title insurance. Past fraud cases included forged deeds or selling a home without clearing liens on the property. Other possible issues include lack of competency or legal authority, false or incomplete legal descriptions, lack of the right to access, deed not properly recorded, mistakes in the recorded dimensions or size of the property, etc.
Other folks have understood properly that the mortgage lender gets title insurance which should obviate the need for the individual to get it. But this too is wrong. The lender’s policy only covers the amount of the loan – not the full property value.
Additionally, honest mistakes are occasionally made, and you do not want to be in the position of having to spend the time and money to sue the builder at your expense – if you do not have title insurance.
The cost of title insurance is mainly based on the value of the property, and as mentioned earlier you only pay once, then the coverage continues as long as you have an interest in the covered property. If you should die, the insurance automatically continues for the benefit of your heirs. While you may want to shop around for title insurance, the cost of a policy is set by law (based on the property’s value) and should be the same everywhere, though certain extraneous/settlement costs may vary.