Why do homebuyers typically require title insurance?

The most important document you fill out when buying a home is arguably the deed. After all, the deed that adds your name to the title is the document that officially makes you the owner of the property. After you record that deed, the title records maintained by the county recorder’s office will reflect your ownership interest in the property. 

As you review your closing documents, you may notice charges for not one but two title insurance policies. Why is title insurance so important when buying a home? 

It protects you from losing your investment

If someone brings a title claim against the property where you live, you could lose everything you invested in its purchase, as well as the equity developed through years of mortgage payments. The mortgage company that financed your transaction could also lose hundreds of thousands of dollars. 

Your title insurance policy helps protect against claims by someone else asserting ownership of the property where you live. A title policy will pay for your legal representation while defending your home in court. It will also reimburse you if the courts eventually rules in favor of the claimant, rather than in your favor. 

The second policy carried on behalf of the lender will cover the outstanding principal balance on the mortgage you hold should that occur. While title coverage can contribute significantly to your total clothing cost, foregoing title coverage is a dangerous choice. 

Learning more about what forms of protection you have during a real estate transaction can help you make the most of those protections during one of the biggest purchases of your life.