Title insurance is one of those items that is rarely understood by most people who purchase it, even those who do so on a regular basis. They just expect a certain level of costs when purchasing a property and figure it is part of the process. Though this is true, it does make sense to completely understand the value of what you are purchasing. Not just to know why but also to understand how to use it when the need arises.
So, why purchase title insurance? The main reason is to protect what for most people is their largest asset. Due to the size and value of this asset, as well as the fact that it is stationary, it is always the first target when someone wants to collect a debt from someone. If the contractor that built your house/condo or the previous owner owed someone money, the first thing they are going to do is place a lien on the property. These liens as long as they are legitimate stay with the property unless released by the lien holder or a senior lien forecloses on the property. If for some reason they are not cleared up when you purchase a property they will remain on that property until cleared or until you sell the property. In this case they can collect from you the current owner, unless of course you purchased title insurance when you bought your property.
How does title Insurance help? Title insurance is protection that you are receiving what is called free & clear title at closing. This means that if something occurred before you purchased the home that gives someone else claim to your property you are protected and can make a claim against your title insurer for any damages that claim may cause. Now in most cases this does not occur because one of the things the title insurer does as part of the closing is check to make sure that all liens or potential liens against your property are paid off and released before you complete the purchase. This due diligence is done both to protect you and the insurer. In fact if the title agent you use did their job correctly you will never have to use the product that they sold you. But at least you can rest easily knowing that no one is going to come knocking on your door with their hand out and bill to be paid for something that occurred well before you made your purchase.
Cody S. Lampariello
Exclusive Title Company, Inc.