Do I need title insurance? What’s it for anyway?

 In Title Insurance

What is title insurance?

The short answer is title insurance protects your interest in your home or property. If you have a loan or mortgage, chances are your lender will require title insurance as a condition of your loan. Title Insurance is a guarantee from the insurance company that they will reimburse you for costs and expenses in the event there is a “title defect” with your property.

“Title Defects” can come in all shapes or forms, ranging from an undiscovered and unrecorded lien, to improperly recorded documents, to forgery and fraud. In fact, you can look here for a list of commonly insured defects in titles. Your title insurance policy will cover you in the event of a loss due to any one of the insured “Title Defects”.

Do I need Title Insurance?

If you are getting a loan or mortgage, your lender will mostly likely require you to purchase what is known as a “lender’s policy”. A “lender’s policy” only names your lender as an insured, and will not cover any out of pocket losses you might experience personally. As an example, you if you purchase a home for $150,000, and get a $100,000 mortgage on the property, with only a “lender’s policy”, and a title defect is later discovered showing the person who sold you the house actually never owned it, you would lose the title to your house. The Insurance company would reimburse your lender for their $100,000 mortgage under their “lender’s policy”, however you would not receive any insurance money, and would be stuck $50,000 out of pocket.

The Solution – Get an “Owner’s Policy”

For usually around $100, you can get what’s called an “owner’s policy” on your title insurance. An “owner’s policy” does just what it claims, protects the interest of the property owner (you). In the same example as before, when the title defect is found, not only would your lender receive insurance money from the insurance company under their “lender’s policy”, but you would also get back at least your $50,000 (more or less depending on your home’s value and your equity in the property) from the insurance company. Sounds like a no-brainer.

How Much Does it Cost?

Title Insurance Premiums are based on two things: 1) A “lender’s policy” is based on your loan or mortgage amount. 2) An “owner’s policy” is based on the purchase price for your home or land. To get an exact quote, contact us at info@hollidaylawfirm.com or 864-232-3541 and we would be happy to provide you with specific premiums for your transaction. The good news is that title insurance premiums are considered “one-time premiums”, which means you only pay them at closing, and not on a recurring basis. Your policy will be good for as long as you own your property.

The Bottom Line

Your home is likely the largest investment you will ever make. It just makes sense to protect your investment with proper insurance. With premiums usually around only $100 for an owner’s policy, it is almost always in your best interest to go ahead and get peace of mind. If you have any questions, or would like to speak further with a Real Estate Attorney, email us at info@hollidaylawfirm.com or give us a call at 864-232-3541, we’d be glad to help!