“Is title insurance a waste of money?” For new home buyers who are in the process of closing and sorting all of their finances before the big plunge into home ownership, this question comes up frequently. It is true that title insurance is an additional cost piled onto all of the other closing fees, which likely add up to thousands of dollars even without further insurance.
However, it is important to know that title insurance offers critical protection against the possibility of being on the hook for large financial burdens later, and unlike other types of insurance, you only pay the fee for title insurance once instead of every month. This means that title insurance is typically the right choice for home buyers to protect their purchase for years to come.
A Defense Against Fraudulent Sellers
One of the most important roles of title insurance is to defend buyers against fraud being committed by a seller, either intentionally or not. It is more common than you may imagine that the person selling a property is not the actual owner of that property. If this is the case, you would not become the legal owner of the residence when you purchase it.
Title insurance can protect you against circumstances such as this. And with a home being among the biggest purchases an individual will make in their lifetime, it makes sense to spend a little extra to make sure that such a purchase is protected.
Protection From Additional Financial Responsibilities
As an additional benefit of title insurance, you can rest assured that you will receive your home free and clear once the closing is done. Part of the process of acquiring title insurance is checking that the property does not have any liens or remaining mortgages on it; if you did not have title insurance, you would be responsible for paying these off yourself, even if you were not the one who took them out originally. However, title insurance protects you against such liens, even if they are discovered after closing, so that you do not shoulder additional financial burdens that you did not consent to.
The Option For Additional Upgrades
Title insurance comes as a standard policy, but if you are particularly concerned about certain issues or if you would like to ensure that you are covered to the maximum, you can spend a little extra (typically a few hundred dollars) to upgrade your title insurance to an enhanced policy. For many home buyers, this extra expense is not a waste because it offers more comprehensive protection against issues such as zoning problems.
The value of an enhanced title policy will depend upon your specific situation and where you are making your purchase, but even a basic title insurance policy covers the major culprits behind title issues during and after closing.
Additional Issues You May Be Covered Against
One of the other advantages of title insurance is that you can add more protection, called endorsements, that enhance your protection in certain areas if you need it. For example, if you are concerned about your right to use a private road that leads to your property, you can add an endorsement to your insurance to protect this. You can also seek further coverage for issues such as property line problems, where the edge of your property is disputed.
Remember: Your Lender’s Insurance Is Not Your Policy
Title insurance is not a waste of money; in fact, it can save you a significant amount in the long term by preventing culpability for liens and other debt or unexpected circumstances. However, it is vital that you remember that the title insurance that you automatically purchase for your lender as part of your closing costs does not cover you as well.
You will need to acquire your own, separate policy in order to cover your purchase. Most lenders require that the buyer fund title insurance for the lender in order to protect their investment, but that coverage extends only to the lender. Some homeowners have been unclear in this area, reaching out after an issue only to find out that they never had a policy as they had believed.
Trust The Title Insurance Experts To Answer Your Questions
Whether you are considering whether a title insurance policy is right for you or you would like to learn more about the types of policies available and what they cover, be sure to trust the experts. The professionals at Mathis Title Company would be happy to answer any questions that you may have. Reach out to schedule an appointment to discuss your options.