Why Do I need Title Insurance?

MYTH: Title insurance claims are rare.

FACT:  The title industry paid $1000 million to resolve claims in 2012.

MYTH:  Title problems hardly ever happen.

FACT:  1 out of every 3 title searches reveals a problem with the title.

MYTH:  Title insurance costs too much.

FACT:  A one-time fee protects homeowners for as long as they own their home.

Today more than ever, consumers are reminded that in order to have peace of mind, they should purchase an owner's title insurance policy whenever they buy a home.  This is especially true when buying a property that has been foreclosed.  Anyone who purchased an owner's title insurance policy when they acquired a foreclosed property will be protected if ownership issues arise due to a lender's foreclosure documentation practice.  An owner's policy provides assurance that your title company will stand behind you if a covered title problem arises after you buy your home.  The bottom line is that your title company will be there to pay valid claims and cover the costs of defending an attack on your title.  Title Insurance compensates and provides legal representation to real estate owners and lenders against any financial loss that might arise because of undisovered liens, encumbrances or defects in the title to the property.  These defects can result in total losses, where a defective foreclosure or forgery means legal title is not actually conveyed, or they can result in partial losses where a neighbor's garage encroaches on the insured property.

There are two basic types of title insurance policies:

A Lender's Policy, usually based on the dollar amount of the loan, protects only the lender's interest in the property should a problem with the title arise. A loan policy insures the lender and remains in effect for the life of the loan. In the event the loan is refinanced, the lender will normally require a new policy.  The cost of the lender's title insurance policy on a refinance could be reduced if the borrower produces a copy of their owners title insurance policy. 

A Owner's Policy, usually based on the home's purchase price, protects only the homebuyer's interest in the property should a problem with the title arise.  An Owner's policy will provide protection against ownership challenges, errors or omissions in deeds, mistakes in examining records, missed liens, forgery and undisclosed heirs, among other things. Unlike most other types of insurance, you pay a one-time premium at the time of your home purchase for coverage that continues as long as you or your heirs own the property.  

The list below outlines a few of the more common defects that can cause loss of title or create an encumbrance on title and are covered by title insurance: