Do I really need title insurance?

Q: Over the years, I have owned several homes and have refinanced my mortgage many times. Each time I purchase a home or refinance the mortgage, I pay for a title search and title insurance. I have never heard of anyone having an issue covered by title insurance. And if I pay someone to search my home’s title, why do I have to pay for insurance? — Jim

A: As an attorney who examines titles, writes policies, and litigates title claims, I would never purchase a home without buying a title insurance policy.

There are too many issues that even the best title search cannot find, and compared to the cost of your home, the one-time price of title insurance is low.

There are good reasons lenders require title insurance to lend you money. The policy you buy as the owner and your lender’s required policy offer different coverage. A lender’s policy does not cover an owner’s claim and vice versa.

Even though you need to purchase a new lender’s policy each time you refinance, your owner’s policy remains in effect as long as you own your home. Plus, your owner’s title insurance policy will usually get you a discount on lender policies both when you first purchase and at each refinance.

Title insurance covers unknown issues that can affect or eliminate your property ownership.

I have seen many title issues in my practice, and they can be costly to resolve. Title insurers pay about $700 million in claims each year and spend even more trying to avoid claims.

Even the best title examiner can make a mistake, and some issues cannot be found by a title search for various reasons.

Common claims include boundary line disputes, unknown easements and liens, mis-indexed documents recorded in the public records, and undiscovered heirs of prior owners of your property.

Your title insurance policy will cover the cost of fixing the problem, including paying for the lawyers who go to court for you when necessary to resolve the issue.

Because of the low, one-time cost of title insurance, it can take a neighborhood’s worth of policy premiums to pay for just one claim.

Title issues can be very expensive to resolve, so the relatively low, one-time cost of title insurance is well worth it.

Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He practices real estate, business litigation and contract law from his office in Sunrise, Fla. He is the chairman of the Real Estate Section of the Broward County Bar Association and is a co-host of the weekly radio show Legal News and Review. He frequently consults on general real estate matters and trends in Florida with various companies across the nation. Send him questions online at www.sunsentinel.com/askpro or follow him on Twitter @GarySingerLaw.