Should I buy owner’s title insurance?

As you may (or may not) know, owner’s title insurance is optional. (The lender’s part of the title insurance is required if you are financing the purchase of your home).

As a Realtor, my attitude is that title insurance is like any type of insurance - if you can afford the loss, then you don’t need the insurance. If you can’t afford the loss (meaning you could lose your property if someone claims title to your land), then you should strongly consider the insurance. I do recommend it.

The reality is that the likelihood you’ll ever need this insurance is very small. However, the loss you could incur if you do not have title insurance is very real and very great. The most likely scenario would go something like this (and this has happened to clients of mine):

There is some issue with the title which would normally prevent a seller from selling his home. The issue could be that someone with the same name has had judgments entered against him or her and attached to the property. Or that there is a cloud on the title. If this seller had not purchased title insurance when he bought the home, he would not be able to sell it until these issues were resolved. However, since he did buy title insurance, he’s able to get an indemnification letter and proceed with the sale of his house even though the title issue may remain unresolved.

A fringe benefit to buying title insurance is that it usually provides mechanic’s lien coverage. If you are buying a new construction home or one which has recently had work done, this side benefit will protect you if one of the contractors files a lien against the property. It is a common misconception that if you are buying a new home you do not need title insurance. The land on which the new construction home is being purchased has changed hands plenty of times in the last several hundred years, and there are most likely many places where there could be issues with the title.As you can tell, I do recommend that you get title insurance, even though the likelihood is that you’ll never need to actually use it. The benefits it provides are great enough to justify the cost and the minimal chance you’ll need to use it. Buying title insurance also usually saves you in refinance fees if you choose to refinance later.

If you have more questions on the topic feel free to talk to your agent.

Note: This advice should NOT be construed as legal advice in any way. This is simply advice from a Realtor as the title insurance issue pertains to real estate. We strongly suggest you consult with an attorney to discuss this issue in more detail.