What is title insurance and do I need it?

What is title insurance? Do I need it?

Home buyers often wonder, what is title insurance, and do I need to pay for it?

Title insurance protects home buyers against title defects affecting the property, such as unknown debts, mechanic’s liens, and ownership of the property by an unknown seller. These are all aspects a title company should review before closing so the insurance protects you against mistakes made by the title company or unknown encumbrances.

Examples of where title insurance could protect you are when the party you believe is the seller is, in fact, NOT the seller or the sole seller. Maybe the sale was a product of fraud, forgery, impersonation, incapacity, or someone shows up one day claiming a right to YOUR home. Title insurance would cover all these situations.

Here are a few things you should know:

1. Title insurance is a one-time premium and insures the title for as long as you own the home
2. Depending on the policy type, it can insure against loss due to disputes over boundaries, access rights, and easements. This may require extended coverage.
3. Title disputes aren’t inexpensive and could include hefty lawyer fees. The insurance covers these costs.

While most brokers recommend purchasing title insurance, you can forgo this cost. Most title companies will require you to sign a waiver to do this. Ultimately, it’s your choice whether you opt out of this insurance since it is not a mandatory purchase. To date, we have not had any of our buyers choose to opt-out.

If you have any questions about title insurance and other closing costs, feel free to contact us and check out our resources for home buyers.