Do I Need Title Insurance?

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When you buy a house, you are making a huge investment – one of the biggest, other than buying a business, that you will make in your life. In the second quarter of 2019, the median listing price of homes in Florida was $265,000, an increase of 3.3 percent from the second quarter in 2018. Even if you buy a medium-sized home, you are going to be shelling out hundreds of thousands of dollars. That’s an investment that you should protect. The first step in protecting your investment is to do a title search to make sure the house you are buying has a good title. The second step is to purchase title insurance.

The Lender Buys a Title Insurance Policy

Most lenders buy a title insurance policy that the buyer pays for. However, that policy does not protect your interests. It only protects the lender if the title is defective or if the title search company or attorney doing the title search made a mistake. If you want to protect your interests, you need to purchase your own title insurance policy.

The Proper Coverage

Just as with any insurance policy, it covers only what is defined in the policy. If you ask a closing agent to procure a title insurance policy for you, the agent is generally adept at choosing a good insurance policy. However, you should always check the policy to ensure it covers everything you need it to cover. Insurance policies list “exceptions.” These are items the insurance company won’t cover. Your real estate attorney will be able to explain the exceptions to you and how they might affect you.

When you buy a title insurance policy, you pay just once for the policy. You do not have to pay premiums every year or every month. A title insurance policy stays in effect even after you sell the property.

Basic Coverage

Most title insurance policies cover items the title searcher might miss, including:

• The property is owned by someone other than the person selling the property;

• Forgery on documents;

• Fraudulent documents pertaining to the title;

• Incorrect signatures on the title;

• Errors in recording the title, including defective record-keeping or other defective records;

• Missed judgments or other encumbrances on the property, including outstanding liens or lawsuits; and

• Restrictive covenants, such as an easement that was given but not recorded. The restrictive covenant must be such that it reduces your enjoyment of the property or reduces the value of the property.

You can accept a warranty of title from a seller, but that involves more paperwork and is often risky, especially if you can’t find the owner once a defect in the title shows up. It’s better to spend the money to get a title insurance policy.