What Is Title Insurance? (And Why You're Buying Something You Hope You Never Need.)
Let's be honest. "Title insurance" sounds about as exciting as reading the terms and conditions before downloading an app.
Most people sign the paperwork, nod politely, and move on.
Unfortunately, this is one of those things that's actually worth understanding.
First things first...what is a title?
A home's title is simply the legal record of ownership.
Before you become the owner, the title company researches the property's history to make sure the seller actually owns it and has the legal right to sell it.
Sounds obvious, right?
You'd be surprised.
So what does title insurance actually do?
Title insurance protects you from problems with the property's ownership that weren't discovered before closing.
Think of it as protection against hidden issues that could pop up after you've already bought the home.
Some examples include:
An unknown lien against the property
Errors in public records
Forged signatures on previous documents
Unknown heirs claiming ownership
Clerical mistakes that affect ownership rights
These issues are rare, but when they happen, they can be incredibly expensive to fix.
Wait...doesn't the title company already check all of that?
Yes.
The title company performs a title search before closing to uncover any known issues.
But they're human.
Public records aren't perfect.
People make mistakes.
Title insurance exists because occasionally something slips through the cracks.
It's basically the backup plan for the backup plan.
Is title insurance a monthly payment?
No.
Unlike homeowners insurance or car insurance, title insurance is typically a one-time payment made during closing.
Once you've purchased it, the policy protects you for as long as you own the property.
Who pays for title insurance?
This depends on where you're buying and what you negotiate in the purchase agreement.
In Oregon, it's common for the seller to pay for the owner's title insurance policy, but that's not a rule. Everything is negotiable.
Do I really need it?
Hopefully, you'll never use it.
That's actually the goal.
Most homeowners never file a title insurance claim.
But if a title issue surfaces years after you've purchased your home, you'll probably be very glad it's there.
It's one of those things you don't think about until you need it...kind of like smoke detectors or backup cameras.
My advice
I know title insurance feels like just another document to sign during an already overwhelming process.
That's why I take the time to explain what you're paying for and answer any questions before closing.
You shouldn't have to pretend you know what something means just because everyone else in the room is nodding.
I'd much rather you ask.
