Title Insurance: What It Is and 5 Reasons You Should Get It

Title insurance is an essential part of the home-buying process, but many homebuyers don't understand what it is or why they need it. In this blog post, we'll discuss what title insurance is, what it protects you from, how much it costs, and explore five important reasons why you should get it.

What is Title Insurance?

Title is your right to own or use your property. Title also establishes any limitations on those rights. When you buy a property, what you’re really getting is the title, which says you’re the legal owner. However, because properties can change hands many times over decades (or even centuries), coming up with an ironclad history of the property and its ownership can be hard. If you’re buying a home, title insurance is a policy that protects your investment and property rights.

A title insurance policy protects you from unknown issues that may come from:

Property right claims: For example, if one day someone comes knocking on your door to say that actually their great aunt left them the property in her will 20 years ago (and would you please pack up and leave).
Documentation errors or forged documents: For example, if your local recorder’s office has an error in its documented history of your property.
Fraud: For example, if the person you thought you bought the house from didn’t actually own it themselves.
Liens: For example, a claim a lender could have on the property if a previous owner used the home as collateral.
Easements: An easement gives someone else the right to cross your property—like if sewer or other utility pipelines pass through your property, or if a hiking trail passes through your backyard. Perhaps you didn’t think there were any easements on your property when you bought it, but one day someone asserts otherwise.

Why Should You Get Title Insurance?

Reason #1: It Protects Your Largest Investment

A home is likely the single largest investment you’ll make in your life. You insure everything else that’s valuable to you - your life, car, personal property, heath, pets, jewelry, etc. - so why not your largest investment?

Reason #2: You Can't Beat The Value

Owner’s title insurance is a one-time fee that’s vey low relative to the value it provides. It typically costs around 0.5% of a home’s purchase price. For example, if your home is $500,000, your one time payment will likely cost you just $2,500.

Reason #3: Covers Your Heirs

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

Reason #4: Reduces Your Risk

This is by far the biggest reason to purchase title insurance. If you’re buying a home, there are many hidden issues that may pop up after purchasing it. Getting an owner’s title insurance policy protects you from legal title discrepancies. Here are just some of the many situations that you’ll be protected from if you have owner’s title insurance.

Unforeseeable title claims such as:

Forgery: For example, the seller misrepresents the identity of the person selling the property.
Fraud: For example, someone steals your identity and either sells your house without your knowledge or consent, or takes out a second mortgage on the property and pockets the money.
Clerical error: For example, an unforeseeable discrepancy in the property or fence line causes confusion in ownership rights.

Unexpected title claims such as:

Outstanding mortgages and judgements, or liens against the property because the seller didn’t pay required taxes
Pending legal action against the property that could affect your ownership
An unknown heir of a previous owner who is claiming the ownership of the property

Reason #5: Peace Of Mind

If you’re buying a home, owner’s title insurance gives you peace of mind knowing that you won’t be stuck with certain existing debts or legal problems once you’ve closed on your new home.