Why You Need Title Insurance
No matter how competently the title search is performed and analyzed, there is no guarantee that the title to the property is free and clear from defects. A title insurance company isn’t guaranteeing clear title but insures you against loss resulting from covered title defects.
If there is a claim against your rights of ownership in the property insured under your policy, owner’s title insurance steps in and protects you. Title insurance protects you from potential claims against your property rights and your title insurance company will cover the cost and fees associated with defending you against the claim.
To reinforce this idea, here is a comparison:
Imagine that in order to get health insurance, you must first go to a doctor for an exam and receive a clean bill of health. The doctor says that everything appears normal at the appointment, and you are now eligible to purchase a health insurance policy. You elect not to purchase a health insurance thinking, why do I need it? Just because you are healthy now doesn’t ensure you are going to stay healthy. Electing to purchase health insurance then would cover you should health issues arise later down the road.
Purchasing owner’s title insurance is similar. Just because a title search was completed does not mean title problems wouldn’t potentially arise in the future. Without title insurance, you could be faced with significant legal fees, costs, and even the loss of all, or a portion of your home.
In the event that there is a claim against your rights of ownership in the property, your title insurance company will cover the cost and fees associated with defending you against the claim.
Your lender understands that purchasing real estate never comes without risk. As a condition for obtaining a loan, your lender will require that you purchase a lender’s title insurance policy. Unfortunately, this only provides coverage to the lender in the event of a title defect. An owner’s title insurance policy can offer you added peace of mind in knowing that the title to your investment is insured for as long as you own the home and after.
It is important that you are aware of your protection options to make the best decision for your needs.
Two Types of Policies
Title Insurers offer two different types of owner’s policies. The one purchased most often by home buyers in the area is the Enhanced Policy. The second type of owner’s coverage is known as the Standard Policy. The Enhanced Policy offers features not available in the Standard Policy, such as protection against post-policy forgery and mechanic’s liens and coverage up to 150% of purchased price. We have provided a comparison of Standard and Enhanced owner’s coverage policies to show additional features provided by the Enhanced Policy which are not found in the Standard Policy. Only natural persons (not LLCs or corporations) may purchase enhanced coverage.
To support this idea, here is an example:
Typically, you are required to maintain a minimal level of auto insurance, called liability insurance.
Liability insurance is for the benefit of other drivers in case you damage someone else’s car. But what if something happens to your car, like your car is totaled, your car is stolen, or you hit a deer? Auto insurers offer comprehensive coverage to protect you if your car is damaged. Without it, you would be responsible for repairing or replacing your car out of your own pocket. Standard and Enhanced title insurance coverage options are similar. A Standard Policy is enough to protect you should basic issues arise, where an Enhanced Policy offers the highest level of title insurance protection available.
