What is Title Insurance and Do You Need It?

You have been home shopping for months.  You have performed thousands of internet searches hunting for your dream home.  You have looked at hundreds of homes in person.  You even submitted several offers to purchase some homes.  But you have finally settled in on the purchase of your dream home.  Now you are staring at your closings costs.  And one of the costs you have to pay is for title insurance.  Which begs the following questions – what is title insurance and do you really need it?

What is Title Insurance

Title insurance has the unique distinction of being the only form of insurance that was actually originated and created right here in the United States.  Title to a piece of property is the evidence that the owner is in lawful possession of that property.  Title insurance insures against financial loss from defects in title to that real property.

For instance, title insurance protects against claims from title defects such as another person claiming an ownership interest in the property, fraud, improperly recorded instruments, encroachments, and other related issues associated with the property.

Why You Need Title Insurance

As we detailed in this prior blog post, during the Great Recession we saw a rise in fraudulent deeds.  Additionally, and as we discussed previously, we also saw the rise of squatters attempting to adversely possess properties that had been abandoned.

Without title insurance the owners of those properties may have lost the property due to the pervasive fraud that was occurring at the time.  And that loss would have had significant financial ramifications.

Moreover, if you are taking out a mortgage to purchase your home then title insurance will almost always be required by the lender.  Your lender will require title insurance because the loan is being secured by the property and title insurance will provide both the lender and borrower/buyer with peace of mind in the event an alleged title defect pops up at a later date.

ABOUT THE AUTHOR.  Hugo V. Alvarez is a shareholder at the law firm of Becker & Poliakoff.  He is the 2017 Dade County Bar Association’s Legal Luminary Award winner.  He was also named to the Best Lawyers in America in Real Estate related litigation.