If you have ever bought a home, the issue of “title insurance” surely came up. If you had a mortgage, you were forced to purchase it by your bank, and if you paid cash for the property, you were no doubt offered it by your closing attorney. And if this was the case, I’m sure your attorney highly recommended your buying it.
Although chances are you did, in fact, purchase it, you may not be exactly sure what it is you bought and why it was so important that you have it. Title insurance is basically a form of insurance that guards against financial loss as a result of defects in the title to your real property. In other words, if there was ever a problem with the chain of title to your property, your title insurance will insure your loss from this defect. This may still seem like a vague description, so think of it this way:
When you buy property, you want to be sure what you are buying is clean and free from defects or other problems. To guard against this, your attorney will always conduct a title exam, which is researching the chain of title to your property in the town’s land evidence records for at least the prior 50 years. This is where all issues with your property are recorded. What he or she is looking for are issues like liens, court judgments, mortgages and easements. These things are easy to find and can usually be addressed and resolved quickly.
But what about issues that a thorough title exam cannot discover? These are the things you buy title insurance to cover. These issue include errors in the public record, illegal deeds, forgeries, boundary disputes, unrecorded encumbrances and even missing heirs to property. And living in New England, one of the more common scenarios even involves the discovery of Native American burial grounds that may be on your land, leading to possible claims against you.
In all of the above instances, none of these parties went to the town hall and recorded their claims, yet these issues can still be a slur on your title. Without title insurance, any of these problems could force you to defend your title at great time and expense and may even result in your losing your property. Having title insurance can put your mind at ease that you won’t lose your home if one of these defects should arise down the line.
Now that we know what title insurance is, the next obvious question is whether it’s worth it. Considering the price you are paying for your property, the answer is almost always yes. Where hazard insurance and car insurance are policies you pay every month, title insurance is different. It is a one-time payment you make at the time you purchase your home and it is good for as long as you own the property. And considering how much you pay to buy your home, title insurance is a small cost. While it varies by state and by the amount you pay for your property, it may cost you less than 1% of the purchase price. This is a small amount to pay one time for peace of mind that some hidden title defect will not cost you your home.
So basically, title insurance guards against all issues a thorough and competent title exam could not discover and in the long run could be one of the wisest decisions you make with regard to your home purchase. So the next time you buy property, when you are offered a title insurance policy, your answer should be yes.
Marc Page is an attorney with a general law practice in downtown Westerly. He is licensed in both Rhode Island and Connecticut and can be reached at 401-596-1726.