Do You Need Title Insurance

Yes, you need title insurance if you own real estate.

It provides protection against losses that occur when the title to a property in California is not free and clear of defects.

Examples include an undiscovered lien (such as mechanic lien) or easement against the property. Most lenders require title insurance as a condition for getting your loan.

Normally, there are two types of policies available when you are purchasing a property – a lender’s policy and an owner’s policy. The lender’s policy will protect the lender’s security interest in the property.

An owner’s policy will protect you, the owner, from claims by others against your property.

You may believe that as long as the lender has a title insurance policy, you do not also need to buy one. You may also believe that if the former owner of the home had a policy, you are protected.

Neither of those statements is true – the lender’s policy protects the lender, and the former owner’s policy protects the former owner. You need your own policy to protect your legal title to the property.

The policy will cover you for as long as you own the property. Your policy will only cover the value of the property.

If you choose to buy title insurance, you should obtain the policy for the full purchase price of the property. Who pays for the title insurance depends on where you live – it’s not set by law, but instead is a matter of local custom.

It may be paid by the buyer or seller, or be split between the parties. In general, in northern California the buyer pays for title insurance, or in some cases it is split between the parties. In southern California, the seller normally pays the premium. The parties are free to negotiate something different than what local custom dictates.

Before you purchase title insurance, it’s important that you understand any exclusions contained in the policy. For example, if you are aware of a lien or claim against the property and your insurance company is not, you may not have coverage for that lien or claim.

You also may not have coverage for eminent domain issues. Before you choose to purchase or refinance the property, you need to understand what your title insurance will cover.

Once you have the policy,  We  hope that you never need to use it!

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