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Why do I need title insurance?

QUESTION:

I don’t believe in insurance. I have heard that I must buy title insurance. How often is it used? Do property owners even really benefit from it? Has it ever really protected anyone?

ANSWER:

Many homebuyers wonder, "Why do I need another insurance policy? It’s just one more bill to pay." There is no requirement that a homebuyer buy title insurance. However, the purchase of a home is most likely one of the most expensive and important purchases a person will ever make. When purchasing real estate, you should want to be sure the property is indeed yours at the closing; and that no individual or government entity or anyone else has any right, lien or claim to the property.

It is generally wise for a buyer to require the purchase of title insurance insuring the buyer’s new ownership as a condition of every real estate purchase contract. It makes no difference how long the seller owned the property or that the seller received a policy when he or she purchased the property. The buyer gets no protection unless the buyer has a title policy naming him or her as the insured owner.

A deed is merely a paper in which the seller transfers his or her right of ownership, whatever it may be, to you. It does not prove that the seller actually is the owner. Also, it does not eliminate any claims or rights others may have in the property.

Before issuing a policy, the title insurance agent performs an extensive search of relevant public records to determine if anyone other than the seller has an interest in the land. With such a thorough examination of the records, any title problems usually can be found and cleared up prior to completing a purchase.

Once a title policy is issued, if for some reason any claim is ever filed against the property, the title insurer will pay all legal fees involved in defending the title, as well as any valid claims.

That protection, which is in effect as long as you own the property, is yours for a one-time premium paid at the closing.

The fact that title insurance agents work to eliminate risks before they develop makes title insurance decidedly different from other types of insurance. Most forms of insurance assume risks. The purpose of title insurance, however, is to eliminate risks and prevent losses caused by defects in title that happened in the past.

Buying a home is a big step both emotionally and financially. With title insurance you will be assured that any valid claim against the property will be taken care of by the title insurer and that the odds of a claim being filed are slim.

This information is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.

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