What is Title Insurance, and Do I Need It?

One question we often get asked by homebuyers is – Do I need to buy owner’s title insurance?

The short and easy answer is, yes!

What is Title Insurance?

Owner’s title insurance protects your right to your home.

Some people think they don’t need owner’s title insurance because their lender’s title insurance protects them as well. But that is not the case. A lender’s policy protects only the lender for the outstanding mortgage balance. If someone else successfully claims ownership rights to the property, a lender's title policy pays the lender the outstanding amount they are owed. It does not protect your ownership or equity in the property. For that you need an owner’s title policy for the full value of your home.

Below are seven of the top reasons why owner’s title insurance is vital for a homeowners’ financial well-being and security.

7 Reasons You Need Owner’s Title Insurance

1. Protects Your Ownership of Your Largest Investment

Buying a home is likely the largest financial investment you’ll make in your lifetime, so you want to be sure to take appropriate measures to protect that investment. You insure everything else that’s valuable to you—your life, car, health, pets, etc., so why not your largest investment? For a one-time fee, owner’s title insurance protects your property ownership rights for as long as you own your home.

2. Reduces Your Risk

If you’re buying a home, there are many hidden issues that may pop up only after you purchase your home. Getting an owner’s title insurance policy is the best way to protect yourself from unforeseen legal and financial title discrepancies. Don’t think it will happen to you? Think again.

Some examples of unexpected title claims include:

1. Forged documents in the chain of title
2. Fraud or impersonation of the property’s true owners
3. Clerical errors that result in a document not being properly filed, recorded, or indexed in the public records
4. Outstanding mortgages and judgments, or a lien against the property because the seller has not paid taxes
5. Pending legal action against the property that could affect you
6. An unknown heir of a previous owner who is claiming ownership of the property

3. A Low Cost One-Time Payment

Unlike most insurance policies that have monthly premiums, owner’s title insurance requires a one-time fee at closing. Costing only about 0.5% to 1.0% of the property’s purchase price, this one-time fee will protect you from covered risks for as long as you or your heirs own the property.

4. Covers You and Your Heirs

As long as you or your heirs own your home, owner’s title insurance protects your property rights. 

Should a covered defect in your property’s title or a claim arise, your title insurance underwriter will protect your financial interests, defend you in court, and settle any covered claims for you.

5. Different than Homeowners Insurance

Homeowners insurance and home warranties protect only the structure and belongings of your home. Getting owner’s title insurance ensures your family’s property rights stay protected.

6. 8 in 10 Homebuyers Agree

Each year, more than 80% of America’s home buyers choose to get owner’s title insurance. And with the American Land Title Association reporting that title problems were found in more than one in every three residential real estate transactions as of 2005, it is easy to see why most are choosing to purchase owner’s title insurance.

7. Peace of Mind

If you’re buying a home, owner’s title insurance lets you rest assured, knowing that you’re protected from inheriting most existing debts or legal problems, once you’ve closed on your new home. While most forms of insurance protect you from what might happen in the future, title insurance protects you from things that may have already happened in the past but are hidden, undisclosed or unknown.

Contact Crescent Title today to learn more about title insurance!