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Is Title Insurance Necessary?

Updated: Jan 17

a title agent standing beside a woman signing a contract

It is normal to want to avoid costs when you can when buying a home — especially since this purchase is going to be one of the biggest ones you make in your lifetime.

While you may be able to cut corners in some places as it pertains to your closing fees, foregoing title insurance is not the answer. It only takes one title issue for that one–time premium payment to pay off.

Understanding Title Insurance

The title to a property is not tangible. Rather, it is a legal concept used to describe someone’s ownership rights. It reflects their right to occupy the space and use it as they see fit.

Title insurance protects this right.

When purchasing a piece of property, your title company will perform a diligent title search to ensure there are no issues with the title, such as no outstanding taxes, judgments, liens, and so on. They also look at the chain of title to confirm that the seller has the authority to sell the property.

Any title issues that appear will need to be addressed before the closing - or as a condition of the closing.

A title commitment is then created. This reports the findings from the title search, states any special conditions that need to be addressed and, of course, offers a title insurance policy.

Title insurance can be purchased to protect against title issues which occurred before you took title to the property but that did not appear during the title search. This may include forged documents, erroneously recorded documents, unknown heirs, missing wills, bankruptcies, liens, and so on. Each of these things, among others, can put your rights to your property in jeopardy. Should they ever arise, title insurance will protect you.

How Does Title Insurance Work?

Fighting title issues can be time-consuming and expensive. So, if an issue is missed during the title search only to appear later, you will have to fight it to save your property – or do whatever you can to save yourself from a significant financial loss.

With title insurance, if you have a policy, you can easily file a claim and know that someone will be fighting for you and your property rights, even in the courtroom. Without title insurance, title defects can lead to a devastating loss.

Do You Need Title Insurance?

There are two main types of title insurance, one for new owners and one for lenders. Each policy only protects the respective party.

Your lender understands the role of title insurance in reducing their risk when lending you money. That is why they will often make purchasing a lender’s title policy mandatory. Again, this will only protect the lender.

If you want coverage to protect your interest in your property, you are going to need to invest in an owner’s title insurance policy. While it is not a required purchase in most places, it is highly recommended by everyone in the industry.

So do you have to buy title insurance? No. But, should you? Absolutely.

Learn More About Title Insurance

Whether you are buying a residential property or a commercial property, your title company is going to present you with the opportunity to purchase a title insurance policy. At Buchanan Settlement Services, we make sure our clients have a true understanding of what title insurance is so that they can make the best decision for their future.

Have questions about title insurance? We have answers.

Contact us today at (717) 762-1415.

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