Buying a house can be stressful, and the last thing you want to think about is your title and losing the rights to your property. That’s where title insurance comes in.
With a good policy, you won’t need to worry, even if a new claim arises. It’s also the only insurance that covers past events like if a previous owner owed money or an heir makes a claim on a past title. If you’re on the fence about whether or not you need title insurance or have questions about a policy, the questions and answers below will help you make a decision that is right for your situation.
Who does a title policy protect?
There are two types of policies, a Loan policy for the lender covering the amount of the mortgage and an Owner’s policy that covers the owner. An owner’s title policy protects you for as long as you own the property and carries over to your heirs if they inherit the property from you.
How does it help me?
If a covered claim is filed against your property, your title company will swing into action. They’ll resolve any issues and may even pay the legal fees involved in defending your rights. Many will also take care of your losses in part or in full.
While it’s rare, sometimes claims from a long time ago do come up. Maybe the county clerk misfiled a mortgage before records were digitized, or perhaps a past owner sold the house without getting signatures from a spouse. If you have title insurance, you won’t need to worry because the title company will straighten out those problems for you.
How much does title insurance cost?
The cost of title insurance changes based on your specific property and where you live. It also depends on the type of title insurance you buy.
The lender’s policy is calculated based on the cost of the loan, and an owner’s policy is based on the value of the home when you purchase it. The rate varies by location. If your bank requires you to get a lender’s policy, you can usually add an owner’s policy at the same time for a small additional fee.
Is an owner’s title policy worth it?
Only you can decide if a title policy is worth it for your individual situation. If you have the resources to pay attorney’s fees to defend your title in court or can accept the risk that a hidden claim could cloud the title and make your property difficult to sell in the future, you might be fine without it. Most people find the peace of mind that comes with a title policy to be worth the price, especially if their state allows them to shop around for title insurance and compare rates.
Do I need it if it’s a new house and I’m the first owner?
You don’t have to get it for a new build, but it’s a smart idea because title insurance doesn’t just cover the structure of the house, it covers the entire property, and the land your new home was built on was previously owned by someone. It also covers any old easements that might run through your property, or even issues caused by a neighbor’s foreclosure that affects your rights of access to your new place.
Do I need title insurance if I pay cash?
You’re only required to get a Lender’s policy if you are taking out a mortgage, but even if you pay cash, owner’s insurance is a good idea to protect your investment.
Why should I get an owner’s policy?
You should consider it because it:
- protects you from future and past claims
- secures your property investment including your down payment and improvements you’ve made
- may cover legal expenses arising from covered issues
- gives you confidence your title company will stand behind you for as long as you own it
When do I have to pay for it?
There’s a one-time fee that’s paid at closing during the settlement process.