What is Title Insurance and is it Worth it?
What is title insurance and is it necessary? I’m Tom Oldfield. I’m a real estate and business lawyer in Fircrest, Washington. Title insurance is different from car insurance or homeowner insurance in that title insurance insures against what happens in the past, not something that happened in the future. If you buy car insurance and you had a wreck last week, it’s not going to cover it.
If you buy car insurance and you have a wreck next week, it’s covered. Title insurance is the opposite, it insures against last week’s problem. There are 2 primary functions for title insurance. The first is that the title insurance company prepares what they call a preliminary commitment that states all of the encumbrances – any debts or easements or anything that’s out there that affects the title – so that you can look at that before closing and see what risks there are, if there are any risks. The title insurance company then issues a policy that guarantees you against loss if there are any other problems with the title that they didn’t disclose.
The other significant value and significant obligation under a policy of title insurance is that if there is a claim, if someone is claiming that they own your property that a deed to the person that sold the property to you was invalid, that you can’t enjoy your property like you should, the title insurance company has a duty to defend that claim. They have to hire a lawyer, pay that lawyer, and defend that claim, and if there’s a loss in value – a lower value in your house – because of that claim they have to pay that loss.
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