What is title insurance and do I need it?

Title insurance protects against claims and defects in the ownership history of a property: an unpaid tax, an old lien, a forged deed, or an undisclosed heir making a claim.

If such a problem surfaces after you close, the policy helps cover your legal costs and losses up to the policy amount.

There are two separate policies. The lender's policy protects the mortgage lender's interest, and most lenders require it as part of your loan.

The owner's policy protects your interest as the buyer. It is an extra purchase, but it is the one that protects your equity and your peace of mind.

Before closing, a title company searches the public records for liens, judgments, and other claims against the property. That search catches many issues in advance.

Title insurance exists for the problems a search cannot fully rule out, like an error in the records or a claim that was never recorded.

Years after you buy, a contractor could claim payment for work done by a previous owner, or an old lien could surface. Without owner's title insurance, that cost falls on you.

With a policy, the title company defends the claim and covers covered losses, up to the policy limit.

Unlike most insurance, title insurance is paid once at closing, not monthly, and the policy stays in force as long as you own the home.

It is a single, known cost that buys coverage for the entire time you own the property.

I review the title and closing paperwork with you so you know exactly what coverage you are getting and what it costs.

I also make sure you understand the difference between the lender's policy and an owner's policy before you sign.