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Nov 18

Title Insurance Myths: Title Insurance is Optional

Two Types of Insurance, One Decision.

There are many common misconceptions about title companies. Today, we’ll cover one of them and outline the real story.

The Fallacy

Unlike taxes and government fees, many believe that title insurance isn’t required in real estate transactions.

The Reality

First, understand that when we say title insurance, we’re really talking about two types of policies, not one.

One policy, called a loan policy, protects the lender. Lenders require this policy as part of their underwriting and compliance process. Although this policy protects the lender’s interest in a property, the purchaser must pay for it.

The second policy is called a fee policy. This policy protects the purchaser. Although technically it isn’t legally required, or required by the lender, we—and every attorney we know—highly recommend it. The one-time cost covers the life of ownership, so, amortized over 10+ years, the annual outlay is nominal. As a safety net to prevent any surprises and avoid disputes, however, it’s invaluable.

In my entire career, there has only been one transaction (out of hundreds of thousands) where a fee policy was not purchased, and that was for a very specific situation.

One important note: Lenders will usually require that a fee policy match the coverage of a loan policy.

If you have any questions about title insurance, or if you would like to discuss an upcoming or potential transaction, please contact us.