When you buy a home, it can seem like the companies involved in the transaction want to nickel-and-dime you to death. Going over your settlement statement will yield many line items that seem esoteric or unnecessary.
Buyers often feel confused and frustrated when they learn that there are two different title insurance charges involved in the purchase of a residential home financed by a mortgage. Some people may go so far as to wave or eliminate the second title insurance charge in order to save a couple of hundred dollars.
Unfortunately, forgoing title insurance is an incredibly dangerous gamble. Although most people never need title insurance after buying real estate, when people do, the losses without it can be catastrophic.
Title insurance protects against claims that someone else owns the home
All of the equity you’ve built up in your house could wind up evaporating in an instant if someone with a valid claim to the title of your property surfaces. Title disputes can stem from a number of situations, ranging from an unrecorded lien against the property to an heir who didn’t receive notification about the settlements of an estate. If these people bring a claim against the property, you could lose your house.
Title insurance pays to defend your homeownership
The first benefit you receive from a title insurance policy if someone brings a claim against your title is access to an attorney. Your title insurance will typically cover the costs you incur in securing a real estate attorney to represent you and your claim to title in court.
Given that title conflicts can often involve the minute examination of records and documents, court costs and attorney fees could easily be many thousands of dollars.
If you lose the case, title insurance protects your investment
Hopefully, your lawyer will be able to successfully push back against someone with a claim to the title of your home. However, in a situation where the courts side with the other party and grant title and possession to that person, your title insurance policy will protect both the down payment you made against the purchase of the property and the equity you have accrued in the years since.
Without these valuable protections, you may wind up paying for an attorney out of pocket and then losing your home and the equity you built in it. Title insurance, in short, helps ensure that you don’t lose out on the money you paid for the home that you own if someone challenges your ownership.