Do I Need Title Insurance?

Posted on April 14, 2014 in Commercial Real Estate, Commercial Representation

So you’re buying your first house? Be prepared to be hit with an avalanche of foreign terms, various fees and strange requirements. One of those various fees is for a policy of title insurance. Typically, you will be borrowing money from a lender to purchase your house, and thus, you have no option other than to buy a title insurance policy for the lender. This is a requirement of virtually every lender. The lender’s policy of title insurance, as you may have guessed, protects only the lender up to the amount they are lending you. The next question you will be faced with is whether you would like to purchase an owner’s policy of title insurance which generally leads to the question of “What is title insurance?”

The short answer is title insurance is an insurance policy that insures that you actually own all of the property you are paying for. Of course, before you close on a home, the title company is going to go to the clerk’s office and search the land records to make sure that the people selling you the property actually have legal title to the property. However, while the records in the clerk’s office are official, they are also sometimes wrong or incomplete.

For instance, perhaps a lien against the property was incorrectly recorded or indexed or taxes were not paid. Or, maybe the property that you want to purchase was owned by Mr. Lee 50 years ago and Mr. Lee passed away while he still owned the property. If all of Mr. Lee’s heirs who had a claim to the property didn’t properly execute the deed there could be issues. Or maybe Mr. Lee was a bigamist with an extra spouse. Obviously, this would not show up in the public records. Would Mr. Lee’s heirs or other wife have a claim against the property? That may only become clear after expensive litigation, and you may wind up losing the house.

So do you need title insurance? The short answer is “yes.” You do need an owner’s policy of title insurance. While the chances of any of the above are admittedly small, there is no reason to take the risk when making a huge investment such as buying a house. Purchasing an owner’s title insurance policy will protect you from expensive litigation and possibly losing your property. If suit is filed against you regarding title to the property, the title insurance company will retain and pay for an experienced lawyer to resolve the issue on your behalf. If he or she is unable to resolve the issue or ultimately loses at trial, they will reimburse you for the value of the property. As purchasing a home is typically the largest investment you have ever made, why not protect it?