Is Title Insurance Worth It?
There has been a lot of discussion in the media lately about clients’ homes being sold without their knowledge. I am with you; the headlines sound scary.
But let’s break this down a bit so it is not so scary.
While these incidents aren’t common, it’s a fraud trend that seems to be growing. There are some common denominators to the stories we hear in the media.
Some of these homes may sit empty for large parts of the year and/or they do not have a mortgage already registered on title.
A Typical Example of Title Fraud
With all the documentation we go through when you purchase your home, you would think it would be difficult for this type of fraud to happen.
But fraudsters are good at what they do! They are able to fool realtors, mortgage brokers, banks and lawyers.
First, a fraud artist steals your identity—the legitimate owner of a property.
Once they have secured your identity, they then try to obtain mortgage financing. The fraudster then makes no payment on the mortgage. Then you, the real homeowner, receive a notice demanding payment.
At this stage, you have the burden of proving you were the legitimate owner and should not be required to repay the fraudulent mortgage.
This is only one form of title fraud. However, an owner’s title insurance policy can protect you against losses arising from forgery or impersonation.
Is an Owner’s Title Insurance Policy Worth it?
For the small one-time fee you pay, this protects you the entire time you own the home. The policy even can cover your heirs if the property passes to them when you pass.
One thing I have to make clear is that only an owner’s title insurance policy will protect you if you suffer from fraud.
As I’ve discussed previously, there are two components to home title insurance—the owner’s policy and the lender’s policy.
The owner’s policy covers you, the owner, while the lender’s title insurance protects your lender from losses if errors were made on the paperwork for your mortgage. This is a standard insurance that all lenders will have on a purchase…they want to reduce the risk of loss wherever possible!
The owner’s policy covers the entire purchase price of your home while the lender’s policy is often just for the mortgage.
When you purchased your home, the lawyer or paralegal likely asked you if you wanted to purchase an owner’s policy. If you are not sure if you have it in place, reach back out to them.
Here is a link to Stewart Title’s information sheet on the value of a residential owner policy.
I like to think of it this way. Your lender will do everything possible to protect themselves and their investment—your mortgage.
Why not do everything in your power to protect yourself?