Is Title Insurance Worth The Cost?

When you decide to purchase a home, it’s important to budget correctly for the variety of fees and payments that need to be taken care of before you can receive the keys to your new abode. These are frequently grouped together under the term “closing costs,” and can include things like escrow deposits, credit report charges, appraisals, inspections, and title insurance

If you have questions about this particular line item, like why have it and is it worth the cost, read on to learn how this little investment can greatly impact your peace of mind.

What’s Title Insurance?

Your title is the legal document that conveys ownership of the property. It’s a package of rights that ensures you can use the land and what’s on it in a reasonable manner or sell it for a profit. 

In the process of buying a home, an in-depth title search is performed by a third party to make sure that it is free and clear of encumbrances, and that the seller actually has the right to sell it to you. 

If the current owner owes property taxes, legal fines, or other creditors, there could be an inconvenient roadblock to moving into your new dream home — also known as a “cloud on title” or a defect on the property. A home sale can’t go forward until these obligations are satisfied.

Even after the clouds have cleared, unforeseen issues can arise, from dramatic occurrences like a suddenly disputed inheritance claim and intentional fraud to simple clerical errors. These problems can result in financial losses and distress, so title insurance was created

Lenders and Owners

There are two types of title insurance, one for the mortgage lender and one for the person buying the home (the homeowner). 

In the lender’s case, their policy would be similar to mortgage insurance in that it protects the company’s financial interests and puts their claim on the property as the top priority in case of foreclosure or other issues.

As a homebuyer, once you’ve taken ownership, you only need to worry about the owner’s policy. This will protect you and your family in the event of a prior claim or if an undiscovered lien comes to light after the title has already been transferred.

Do You Need Title Insurance?

In short, yes, you should go ahead and invest in title insurance coverage. It’s a one-time, upfront fee and not a monthly premium — and it’s always better to be safe than sorry.

Buying a home is a major purchase, a life-altering investment, and a financial risk. It makes perfect sense to do what you can to protect yourself and your family from loss, inconvenience, and emotional harm. Relative to the purchase price of your home, the cost of a title insurance policy is minimal

Your title company or attorney will perform a comprehensive title clearance search, which is a thorough inspection of any and all public records pertaining to the property. 

Mortgages, liens, and legal judgments are all required to appear on these searches.

However, it does happen that liens can go undiscovered or lawsuits can be filed by someone with a claim against the previous owner. While rare, forgery is a serious crime that still occurs. If people try to sell off their elderly relatives’ property, for example,  while they’re incapacitated, that’s a fraud, and you could lose out in a court battle.

The former property owner might have received the real estate as an inheritance or a gift. But contesting wills is a big business these days, especially if the estate in question is large.

Title insurance also protects you against undocumented easement issues or physical encroachments that might have been missed in your property survey. These kinds of problems can arise quickly in your HOA-ruled community and become an expensive hassle.

The title clearance process isn’t always perfect, and even in this high-tech age, documents can be recorded improperly. Title insurance will bear the burden if errors are made so you’re not on the hook for a bunch of your hard-earned money.

How Much, Exactly?

The actual cost of your title insurance depends on a few key factors. These include the value of the property, the insurer, your state’s regulations, and the extent of your coverage.

Premiums can range from hundreds to thousands of dollars, but it’s a payment that you only have to make once. You may be able to save by bundling or negotiating add-ons, or in some cases, the seller can be convinced to pick up the tab. In any event, don’t sell yourself short when it comes to protecting yourself from loss. 

Ask Your Title Partner

Purchasing a new home can be like navigating uncharted waters without a map — but you don’t have to go it alone. At Landtrust Title, we put people over paperwork. Our concierge support, personalized service, and detailed expertise offer you a valuable partnership in the journey towards homeownership and financial freedom. 
If you have any questions about closing costs, title insurance, or any other detail that arises during your search for the perfect home, reach out to Landtrust Title Services via email at [email protected], or call us today at 312.528.9210.

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