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Picture this: your family has found the perfect home. It has everything you want in the perfect area for the perfect price, so you buy it. Everything is going well, you are in your perfect home, but then you find out that there is a lien on your house that hasn’t been paid! You wonder if you have to pay for the previous owner’s mistake, or that you may even lose your home. That’s where title insurance comes in.

 

Title insurance is a type of insurance that protects against financial loss from errors in a home’s title. What this means is that if there has been some form of legal slip up in the succession of ownership of a certain property, the party that has been shorted would be entitled to a form of legal compensation. Title insurance is a one-time payment made by the buyer at closing that protects the lender against having to pay compensation to any such party. This insurance is not optional, and the lender will generally require that it is included in the closing terms. You can also buy a separate policy to protect yourself, this, however, is not mandatory.

 

Not many national companies seem to offer title insurance. In 2014, 4 companies (Fidelity National Financial, First American Corporation, Old Republic National Title Insurance Company, and Stewart Title Guaranty Company) made up more than 80% of the market for title insurance. Smaller, local companies account for the rest. You are allowed by law to research and choose your own title insurance company, but most agents will have a recommendation if you would rather not. Although it may seem like just another item on your closing cost list, title insurance is a worthwhile investment in your home.