J. Kelly Kennedy, Attorney/CPA, PLLC

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Why do I need title insurance?

You may have always wanted to own a home in Florida, a place where you can raise your family or simply live out your dreams. Now that you are ready to purchase, it may shock you to see the list of expenses required during closing. Among them is the cost of title insurance, which may seem unnecessary because you are also paying for a title search.

The purpose of the title search is to verify that the person selling the house is the true owner and has authority to sell you the property. A title search may reveal that someone else has a claim on the property, such as a contractor or debt collector who has placed a lien on the house. However, even if the title search comes up clean, experts still recommend purchasing title insurance.

How can someone claim my property if I had a title search?

A title search will find clerical errors on deeds, outstanding liens, unpaid mortgages and easements on your property. You may not even realize those things exist because a properly completed title search will take care of those issues well before closing. However, even a trained agent of a title company may not be able to find everything, for example:

  • Forgery on the title
  • Forgery on a past mortgage
  • Fraud committed by previous owners of the property
  • Errors in transcription
  • False or improper notary
  • Mistakes in estate distribution or misinterpreted wills
  • Undisclosed heirs
  • Tax liens

If any of these issues should arise while you are the owner of the property, you would be responsible for resolving the legal dispute. Someone with a lien may come to claim his or her due, or a forgotten heir may believe the home belongs to him or her. Without title insurance, you may spend a great deal of money fighting the claims and, ultimately, lose your home.

Your lender may require you to have a lender policy, which protects the mortgage company as long as you are paying for the house. However, it may also benefit you to purchase an inflation rider. As you pay down your mortgage, your lender policy coverage decreases. An inflation rider continues to cover your title and protect you against claims to your property. Title insurance will cover your legal fees, the expense of correcting and clearing your title, and, if necessary, the cost of your home.

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