What is it and do you need it?
Title insurance is insurance you purchase through the settlement company, charged to you at closing and part of your “closing costs,” that insures the “ownership chain” of the property.
There is Mortgage Title Insurance that insures the mortgage lender against title claims and Owner’s Title Insurance which insures the new homeowner against title claims.
All mortgage lenders require buyers to purchase and pay for Mortgage Title Insurance. Owner’s Title Insurance is not required, but the question we get asked is “Do I need to buy Owner’s Title Insurance?” While it’s not required you do so, I always highly recommend to buyers they purchase this insurance. It protects you against potential claims that could be made against your property—and you. This protection lasts forever—even after you sell your home.
What claims could there be? This is the essence of the reason to purchase Owner’s Title Insurance. The answer is, because you don’t know what claims could be made. The most frequent claim made involves boundary disputes. Boundary disputes arise when either surveys are not done or mistakes were made on a prior survey and recordation of that survey. People are people and honest mistakes do happen. And it’s these types of mistakes that Owner’s Title Insurance covers. But it’s not just boundary issues, it’s any title issue, and cloud on the title that you will receive coverage for in the case a mistake is found after you take ownership. Other examples of clouds on the title include tax liens, hospital liens, mechanics liens—things created prior to your ownership that were never removed from the chain of title. Imagine you move into your new home and several months later you get a notice from the IRS informing you that there is an outstanding lien on the property you’ve just purchased. It happens. If you purchased Owner’s Title Insurance, you call the settlement company and send them the notice—they will handle it. Problem solved. If you didn’t purchase Owner’s Title Insurance, you now have to solve this problem and it will likely involve hiring an attorney.
While these problems don’t arise often, it’s a prudent decision to purchase Owner’s Title Insurance so you can be secure in the knowledge that you have protected your investment and your own security.
If you have more questions about the different types of Title Insurance and what coverage does for you, reach out to us and we’ll be happy to answer your questions and refer you to one of our title specialists if necessary.