For most people, buying a home is one of the most significant and most fulfilling financial investments they will ever make. Whether you recently purchased a home or just about to close, you may be considering whether you need to buy title insurance. Here’s how title insurance works and how to decide whether or not you require coverage.

How title insurance works

Traditional insurance policies like car insurance or health insurance typically cover events that could happen in the future, such as car accidents or health problems. Title insurance, on the other hand, differs by providing coverage against claims from past occurrences. There is no coverage for anything that happens to the title after you purchase title insurance, just events that happen before. Once a homeowner purchases a property, title insurance will defend against litigation that challenges the new property owner’s validity.

At the very least, a title challenge that comes up after closing could mean paying a variety of legal expenses – at its worst, you could lose your property and any money you’ve put into it. Title insurance can help protect against:

  • Ownership by another party
  • Forgery, fraud or incorrect signatures
  • Errors in the public record
  • Undiscovered liens
  • Omitted heirs

Should you consider title insurance?

The decision of whether or not you should consider title insurance depends on several factors. For example, since title insurance covers title errors and defects from the past, it might be worth investing if you are purchasing a very old property. If you have a mortgage, many lenders will insist on title insurance to protect their interest in the loan.

Whether you need title insurance will depend on how comfortable you feel about purchasing a home with the title information you have. For many homeowners, the cost of title insurance is well worth the peace of mind that comes with it. After all, a claim could arise years down the road. With an investment as significant as a home, it’s often a good idea to be safe rather than sorry.