Title Insurance and Why You Need It

When you purchase a home, you are given the "title" - the owner's right to possess and use the property. Title insurance protects the buyer against the possibility that sellers (or previous sellers) do not have free and clear ownership of the property, and therefore the right to transfer the home.

A title company will research the property and conduct an in-depth review. They will look through records for anything that might cause problems — ownership disputes, restrictions, unpaid taxes, liens, and more. Their goal is to document the chain of title and identify any issues that could become major problems down the road.

At the end of the process, the title company issues a title opinion. This is a legal document that states that the title is valid. The title opinion is part of obtaining title insurance. If another party is actually the rightful owner of the home, your title insurance protects you from financial loss. Unlike homeowners insurance that is limited to future incidents, title insurance is limited to problems that exist when the policy is issued.