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Do I Need Title Insurance?

So you’re ready to buy some property, huh? Congratulations! But while buying property can be an incredible investment, if you’re not careful, you could be buying more than what you bargained for. You’re probably wondering what the heck we’re talking about over here. We’re talking about title insurance: what it is, how it works and why we recommend it.

What Is Title Insurance?

There are no dumb questions over here, especially this one. If you’ve never owned a home or purchased property, then you’ve likely not had to worry about title insurance.

Title insurance is what protects your property in case there’s ever a question of ownership. Let’s say sweet Jess decides to buy her very first home on some property with cold, hard cash (amazing, right?). Since she didn’t have to deal with a mortgage company, she didn’t think twice about looking into the title (which also means she didn’t get title insurance). Well, a few years later, a family knocks on her door and tells her that they came to claim their late great-granddad’s land. Yikes. How could that be? And who really owns the property?

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Well . . . unfortunately, both parties are owners. This is why having title insurance is so important—it ensures that you have a clean title and won’t have anyone knocking on your door to claim their property down the road.

Types of Title Insurance

There are two types of title insurance: owners and lenders. Each one is important, but the one you decide to purchase depends on how you own your property.

Owners Title Insurance

This type of title insurance covers you (the owner) from being sued if someone has a beef with your property.1 Let’s say the previous owner had a lawn care specialist . . . but stopped paying their bill before they sold the home to you. The lawn care company put a lien against the home in hopes that the owner would settle up. (A lien is a legal right to someone’s property until they settle their debt.) But if you didn’t get title insurance, the previous owner’s lawn care bills are now your problem to deal with.

Lenders Title Insurance

This type of title insurance protects your lender or mortgage company from any title issues with the home.2 When you purchase your home through a mortgage company, they’ll require you to get this type of title insurance to protect them in case anything happens. So in our previous example, if Good Sons Lawn Service wants to get paid, your lender is protected . . . but you aren’t. That’s why it’s important to get lenders and owners title insurance at the same time.

How Does Title Insurance Work?

Like we said before, title insurance is the protection you need to make sure your property won’t have any awkward and unwelcome visitors in the future. We all have a past. It’s always awkward when you run into your ex at the supermarket and they ask about their old sweatshirt (the one you threw away). Likewise, title insurance ensures that your property won’t get a visit by its ex asking for their share of the home.

When you purchase a new home through a lender, your mortgage company will offer to do the title shopping for you. But since you’re the buyer (and the boss), you get to decide what works for you or even do the shopping yourself. Once you purchase the title insurance, your title insurance company will do a title check. They’ll be searching for liens on the home, making sure that the owner you’re purchasing the house from is the true owner, and checking that there’s nothing unsavory in the property’s past. You’ll want to get the all clear from the title company before you go through with the purchase of your new property.

If anything comes up (like that really large lawn care bill) or if the property is in the middle of an estate war, that should be the red flag you listen to—unless you’re willing to pay up for someone else’s mess.

Do I Really Need Title Insurance?

You need title insurance any time you buy real estate. There are no ifs, ands or buts about it. Title insurance is a must-have when you’re purchasing your next home, land or property.

Being a property owner is expensive enough as it is. There’s no need to pile on more money (that you don’t even know about yet), especially if you don’t have to.

Title insurance costs are different depending on where you live and the purchase price of your home or property. The nice thing about this type of insurance is that you’ll only pay for it once per property. Once you’ve secured coverage, you don’t have to worry about it again.

Want to learn more or even get set up with title insurance of your own? Get in touch with an Endorsed Local Provider in your area to help you find affordable coverage on the things that matter. They’re the experts we trust to do things the right way (and the Ramsey way). 

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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