“Hey Jeremy, do I really need to get title insurance?”  It’s probably the most common question I get from new buyers when we’re getting ready to close on a house.  So what, exactly, is title insurance?  Well … there are different kinds.  But we’ll get to that.

Title insurance is an insurance policy that protects a party’s “position” in the transaction (i.e. position = money).  What the policy does, then, is provide insurance that the real estate taxes were paid, for instance, or that there’s a clear line of ownership to the property.  Without title insurance, the insured would have to pay legal fees to remedy these situations.  You don’t want that, do you?

When you’re buying a property and financing it, the lender is going to require what is called lender’s title insurance, which means their portion of the transaction is covered by the policy.  As a buyer, you’ll have the option of choosing owner’s title insurance, which covers the whole of the transaction, not just the lender’s portion.  Let’s say you’re buying a $200000 home, and financing $150000 of it.  The lender’s title policy would be on only $150000, but adding owners title insurance would increase the coverage to the whole $200000.

So do you need it?

I can’t say.  Some clients get it, and some clients don’t, and what works for one buyer doesn’t work for another.  When I say that to a buyer, I seem to always get the response “okay, so what would you do?”

If I had a sports car, I wouldn’t just put half a cover on it to protect from rain.  Get my drift?

Thanks for the Ferrari pic, KlausNahr.

Updated 9/10/10 – Don’t want to read the post?  Watch the video, from www.RealCentralVA.com