Do You Need An Owner's Title Insurance Policy For Your Home?

Certified Mortgage Advisor
NMLS 1701021
Published 
April 19, 2020

Q&A: Purpose of buyer title insurance

What's the purpose of home buyer title insurance? Is it worth the cost? I see it listed as optional. So absolutely.

Lender's insurance

There are two types of title insurance. Offered when you purchase a home, first is the lender's title insurance. This is not optional if you're using financing. So the lender's insurance protects the lender in case there are any title defects, meaning that there's some error with the recording of the deed and who owns the property. That protects the lender and the mortgage that they have on the property.

Optional buyers insurance

The other is an optional buyer's insurance. This protects you as a buyer. If there are errors in the recording of the deed anywhere in the past.

Do you need insurance?

It's really up to you and how much risk you want. I would always suggest getting it because I've seen issues where it's actually needed.

Why you need it

So here's a really good example. Let's say you purchase a home. You've been living there for five years. And then you end up finding out that 15 years ago, a seller signed off on the home, but they have an ex who was supposed to sign and they didn't sign off. And now that X has legal ownership of your property because they never signed. So they go to court and sue for the ownership of the property. So who's going to pay the costs to settle that in court, unless you have owner's title insurance?

Insurance can protect you

The owner's title insurance is going to make sure that you have protection in case anything happens in the past. I've even seen this in our local area where we had an issue very similar to that where it was kind of in an estranged X didn't sign off on something and then, you know, this home that was a hundred thousand dollars is now worth a million because a commercial development came in.

So now that land was valued extremely high. and so now this X wants to come back and claim ownership of the property because they never signed off and it's a mess and they didn't have owner's insurance.

Insurance keeps you at ease

If they had owner's insurance, it would've just paid off the x and they wouldn't have had to worry about it. But instead, it had a long drawn-out court battle. And have no idea what happened with it. But so it's really something that's optional. It's up to you. I personally would get it. But if you're trying to save some money, then you could go without it, just know that you have some risks of things like that happening in the future. If you don't ensure the title on your behalf.

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