Title Insurance: What It Is, What It Costs, and Why It’s a Good Idea

As with many other things that crop up when you are buying a home, title insurance is one of those things that doesn’t seem like a big deal to have– until such time you realize you need it.  And when that time arrives, hopefully you’ve prepared and invested in it… otherwise, you may find yourself dealing with a legal mess you were never prepared for that will greatly affect your experience and ability to move forward with the home buying process.  

What Is Title Insurance? 

 According to veteran title insurance attorney Cassandra Karamanos, of Century Abstract Group,  “Title insurance protects one of your largest in most important investments: Your home.   When you are purchasing your home, a search is performed to determine whether the seller has free and clear title and what liens may be against the property.  However, there have been many cases where an issue did not show up in the search.  That is where title insurance comes in.  It is not a guarantee that you have clear title. Rather, it is an insurance policy that protects you against financial loss if an issue arises.”

         “Most lenders will require a loan policy of title insurance to ensure that their mortgage is the first in priority, but owner’s policies are crucial as well. If your lender is already requiring you to purchase a loan policy at closing, it might not cost much more to add owner’s coverage,” she said.  

Why Do You Need It? 

         “There are homeowner’s horror stories that are all too common,” says Cassandra.  “After a buyer settles on their new home, a relative or ex-spouse of the seller appears and claims that they have rights to the property. There are also cases of mortgages or taxes that are liens on the property which did not appear on search that then become the responsibility of the new owner”, she says.  “Imagine the nightmare of being faced with hundreds of thousands of dollars in liens after you just purchased your dream home.  The owner’s policy of title insurance is there to reimburse the buyer for attorney’s fees, court costs, and other financial loss should such a disaster occur.” 

         She also adds, “If you think about the cost of your home and the value you put on that investment, the one-time cost of title insurance is definitely worth the peace of mind that it buys.”

How Much Does Title Insurance Cost?

At this point it’s pretty clear that a lender’s title insurance policy is a must, and having an owner’s policy isn’t a bad idea either.  But how much will it all cost?

Sometimes, nothing at all.  There may be an opportunity for you to negotiate for the seller to pay both properties.  However, should you end up having to shoulder the cost for your own coverage, it still might not be that bad.  

A lender’s title insurance policy is a given, and maybe now you think an owner’s policy isn’t a bad idea. How much will it cost to buy both?

Sometimes nothing. You might be able to negotiate to have the seller pay for both policies.  There’s a possibility of bundling the two policies together, and buying one can give you the opportunity to get the other at a much lower rate.  It’s definitely worth looking into, as a “buy-one-get-one” kind of deal.  Costs and discount opportunities vary from state to state, depending on their real estate and lending laws.  Some states regulate their insurance rates, so the cost will be fairly consistent… in others, you may want to do some shopping around to get the best price.  A rough estimate of between $100-$4,000 isn’t a bad place to start when trying to get an idea of the cost.