Why do you need title insurance? It’s the second most asked question in our office. The most asked question is – When do we get the keys? That was discussed in an earlier post here at TPREG.com.
Let’s start with the official definition for title insurance. From www.ctic.com, we have the following:
Title Insurance ”“ Assurance of indemnification for loss occasioned by defects in the title to real property or to an interest therein which is insured.
Huh? Clear as mud, right?
Let’s get away from the legalese and talk in plain English. Title insurance is an insurance policy. It is different from other forms of insurance. Automobile insurance, for example, protects you from some “future” event, be it a fender bender or theft of the car. Title Insurance also protects you from some future event, like a claim or loss due to a title issue. The difference is that these issues were caused by a past event. The event causing the claim occurred prior to your purchase of the property.
Another big difference from other insurances you may carry is that title insurance on your real property is a one-time premium. There is no annual premium to keep the policy in effect. It covers your real property as long as you or your heirs own retain an interest in the property.
Let’s go back to our original question. Why do you need title insurance? The easiest answer is to protect what is probably the biggest and most important investment you will ever make.
What sorts of issues are covered? Here’s a short list of some of the more common risks that can cause a loss or encumbrance of title:
Undisclosed or missing heirs
Deeds by persons purported to be single when actually married
Liens for unpaid inheritance, income, or estate taxes
What happens if any of these defects or hidden risks are discovered? Title insurance covers the cost of defending any lawsuit against your title as insured. It will also rectify any issues discovered, or pay any losses for the insured. It is important to understand that these claims can arise from a past event that could not be discovered in a public record search. Therein (oops, legal word) lies the true value of title insurance.
So the answer is simple. You need title insurance because it provides peace of mind in knowing that the property you are buying and the investment you are making is a safe one.
One last bit of legal-speak. Please be aware that this post is designed to be introductory and educational only. It is not to be construed as a statement of duties, liabilities or coverages.
About the Author: Bill Risser is an Assistant Vice President and Branch Manager of the Chicago Title ”“ Gilbert office. You can find him at CT-Gilbert.com and on Twitter at @billrisser, that is, when he’s not on a local golf course with his son, at the movies with his wife, or tending to one of his four fantasy leagues (NFL, MLB, PGA, and NASCAR).