Why pay for title insurance?

Many Buyers and Sellers wonder about that ‘title insurance’ charge on the Settlement Statement.  The Seller buys a policy for the Buyer and the Buyer pays for a policy for their Lender (if they are getting a mortgage).  So what is it and why?

What is title insurance?

Title insurance protects a policyholder against challenges to rightful ownership of real property, challenges that arise from circumstances of past ownerships.

Why do I need it?

Each successive owner brings the possibility of title challenges to the property. To illustrate how title insurance protects the home owner(s), here are a few reasons for title insurance:

  • A deed or mortgage in the chain of title may be a forgery.
  • A deed or a mortgage may have been signed by a person under age.
  • A deed or a mortgage may have been made by an incompetent person.
  • A deed or a mortgage may have been made under a power of attorney after its termination and would, therefore, be void.
  • A deed or a mortgage may have been made by a person other than the owner, but with the same name as the owner.
  • The testator of a will might have had a child born after the execution of the will, a fact that would entitle the child to claim his or her share of the property.
  • A deed or mortgage may have been procured by fraud or duress.
  • Title transferred by an heir may be subject to a federal estate tax lien.
  • An heir or other person presumed dead may appear and recover the property or an interest therein.
  • A judgment or levy upon which the title is dependent may be void or voidable on account of some defect in the proceeding.
  • Title insurance covers attorneys’ fees and court costs.
  • Title insurance helps speed negotiations when you’re ready to sell or obtain a loan.
  • By insuring the title, you can eliminate delays and technicalities when passing your title on to someone else.
  • Title insurance reimburses you for the amount of your covered losses.
  • A deed or mortgage may be voidable because it was signed while the grantor was in bankruptcy.
  • There may be a defect in the recording of a document upon which your title is dependent.
  • Claims constantly arise due to marital status and validity of divorces. Only title insurance protects against claims made by non-existent or divorced “wives” or “husbands.”