Are you in the process of buying a house or perhaps that piece of property you’ve had your eye on for all these years? If so, chances are good that you’ve had a conversation about title insurance if you have a lender or realtor. If you are like most people, you might respond with the question, “What is title insurance?” There are many misconceptions about the little-known coverage banks require and that every property should be covered. Here are six of the most surprising misconceptions about Title Insurance:
Misconception #1: The Bank Adds Title Insurance for Your Protection
This is partly true. However, your lender only has their interest at heart. The title insurance they require only covers their interest in the property, and the coverage disappears when you pay off the loan. You’re much better off purchasing your own policy that will cover the total value of your property for as long as you own it.
Misconception #2: You Don’t Need It If You’re Paying Cash
Not needing it and not being required to purchase it are two different things. No law says you must buy title insurance with your property. And if you’re paying cash, title insurance may not even enter the conversation. The problem is that you DO need it, but it isn’t required.
Every property purchase should include title insurance to protect your investment. The single payment upfront that provides coverage for your entire life is unmatched in the insurance industry. Title insurance is a good investment whether you’re paying cash, receiving the property as a gift, or taking out a loan. You shouldn’t go without it.
Misconception #3: It’s Too Expensive to Consider
This needs to be cleared up once and for all. Title insurance is lifelong coverage for pennies on the dollar. If you think the insurance is expensive, wait until you have to pay attorneys fees and court costs for a title dispute. Court disputes can cost tens or even hundreds of thousands of dollars. Title insurance protects you and your title for as long as you own the property.
Misconception #4: I’m Already Buying Home Insurance, and I Don’t Need To Pay for Another Home Insurance
This one is more for the first-time home buyer. First-time home buyers easily confuse home insurance with title insurance. It’s a common misunderstanding by someone purchasing both policies for the first time. Buying your first home can be like taking a drink from a fire hose–there is so much you must learn. Our advice would be to let your professionals guide and advise you as you go through this process. And yes, you need a home insurance policy (protect your home) and a title insurance policy (protect your ownership rights to the property).
Misconception #5: I don’t need two title insurance policies
This is another one for first-time home buyers. When you finance a home, your bank will require you to purchase their title insurance policy. You may, at your discretion, purchase your own policy. We recommend that you always purchase a title insurance policy that protects you for the full value of the property for as long as you own it. Banks only want the coverage in place for your loan amount until it’s paid off. After that, the bank coverage disappears entirely, leaving you with no protection.
Cortes and Hay have been priding lender and personal title policies across the state of New Jersey for more than 50 years. We are here to serve you throughout your property purchasing experience. If you have any questions, please get in touch with us. We love to educate you about the value of adding title insurance to your home.