Why do I need title insurance?

When I was 22 I bought my first house. I can recall being very stressed about having enough money for all the costs associated with buying a home. I also remember, everyone telling me we "had to" purchase owner's title insurance. My agent at the time told me it was optional, and to be honest had no intention of shelling out more cash for something that was clearly not mandatory. Well, after several long debates, they wore me down and I purchased the "optional" owner's title insurance, but let me say I was NOT happy about it. Years later I went into real estate and realized how very important this "optional" owner's title insurance really was. Clients ask me all the time about it, so... here it goes.

When you buy real estate it's important to know whether there are judgements against the former owner, whether they were married, single or divorced, if taxes have been paid, etc. Title insurance serves to indemnify you (the new buyer) against losses occuring through defects in the title. Typically a title examination is done to investigate the chain of title. If the title is insurable, the title company guarantees against loss due to defects in title not listed in the policy. This guarantee (title policy) normally pays expenses associated with any lawsuit which questions the title.

When I was forced, (by family) to purchase my policy years back, my question was: "If they do a title search every time the property is sold, why do we keep checking?" I was told "people are human and make mistakes when performing the title search and when indexing these details. Basically, CYA."

A few issues covered by standard policies would be: defective recording of docuemnts, liens not disclosed, pre-policy fraud, mechanics liens, and many more.

When you buy a home, our consumer disclosures make reference to lenders & owner's title policies. Lenders require a policy to protect the lenders interest in their investment known as your home, don't you think you should protect your interests as well?