How Does Inflation Affect My Title Insurance Policy

Like taxes and commercials, unfortunately, inflation is just a fact of life. But what effect, if any, does it have on your title insurance policy as a homeowner? The answer depends on several factors. Let’s take a closer look at how the current situation is impacting the real estate market — and what you can do to protect your assets.

The Basics

The term “inflation” refers to an increase in the costs of goods and services that causes a decrease in the purchasing power of your money. However, the value of property rises along with inflation, and right now, home demand is high and supply is limited, which means it may be a great time to sell and receive multiple offers on your home, maximizing your return. 

As Mark Twain famously said, “buy land, they’re not making it anymore.” He may have been joking, but it’s especially true today. And when you purchase with a fixed-interest rate mortgage, your payments will stay the same month after month while the cost of everything else rises, along with (hopefully) your income as well. 

Since financing rates are still relatively low, even if home prices are rising fast, you can still expect to see a healthy return on your investment. It’s an industry maxim that buying real estate is an excellent hedge against inflation, especially if you’re purchasing a dwelling that you plan to live in for a long time or leverage for rental income as part of your retirement nest egg. 

The Importance of Title Insurance

When you buy real estate, it’s crucial that you have a trusted title company as part of your team. They will play a vital role in ensuring that the closing process goes smoothly and that you receive a title that’s clear of any clouds or defects. You should also always protect your investment with title insurance

While it might seem like an unnecessary complication, getting a title insurance policy is actually simple, affordable, and the smart thing to do. Without it, you could be held financially responsible if there are any encumbrances, liens, clerical errors, fraud, or long-lost claimants related to a former owner. These issues can invalidate your ownership of the property as well as incur additional unpleasant charges like court fees. 

Another convenient aspect of title insurance is that you only need to purchase it one time, and you only pay one premium as part of your closing costs, and then you don’t have to worry about it again. It’s a generally low payment that’s based on the amount of your mortgage loan and the value of the real estate. 

Hedge Your Bets

During your closing, speak with an expert at your title company regarding an inflation rider on your policy. This is also referred to as an Increased Policy Amount Endorsement or an Inflation Protection Endorsement. These provisions are very common and will give you additional peace of mind as your property value rises. 

You can also maximize your coverage with an inflation rider if you have an existing homeowner’s policy. The cost to add these riders is minimal compared to the benefits, as most policies will offer up to 200% of the originally covered loss amount. 

Extended coverage will provide the protection you need for your family home or investment property if any unforeseen claims are made against the title, for as long as you or your descendants own it. 

Get the Answers You Need

The housing market is extremely competitive and the financial landscape is constantly shifting, but putting your money in real estate is almost always one of the best strategies for hedging against inflation. 

Inflation won’t affect your title insurance policy — and as a matter of fact, you can make sure that your coverage includes extra resources to protect you as your home increases in value. 

If you’re thinking about buying, now is the time to act. Mortgage interest rates are still low, and our experienced team of realtors, attorneys, and title experts are here to help you find the perfect home or investment property. We’ll be with you every step of the way, from the first offer to the final signature and beyond. Reach out today!

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