Title is your ownership right to your property. Title insurance is a policy that protects your investment and property rights.
There are two types of title insurance policies:
An owner's policy protects your property rights for as long as you own the property.
A lender's policy is usually required by the lender; a lender's policy only protects the lender's financial interest in the property. The purchaser typically pays for a lender's title insurance policy.
The simple answer is yes, you do need owner’s title insurance!
In the event of a claim, lender’s title insurance only ensures that the lender has an enforceable lien on the property – it will not protect your claim to title.
Owner’s title insurance protects you from financial loss should problems arise regarding the rights to ownership of your property. There could be hidden title defects that even the most thorough title search will not uncover, such as improper execution of documents, errors in recording or indexing legal documents in county records, forgery/fraud, undisclosed or missing heirs, unreleased mortgages, and unpaid judgments and liens.
You may not learn of such title defects for months or even years after you take title to your property, and you may be forced to spend a substantial amount of money on legal representation – and such efforts could still result in the loss of your property!
In addition to protecting you from financial loss, your owner’s title insurance also pays the cost of defending against any covered claim.
Owner’s title insurance is a one-time premium based on the value of your home that is paid at settlement as part of your closing costs. It is usually less expensive than the annual cost of auto insurance! Even though it is a one-time premium, your owner’s title insurance will continue to protect you as long as you or your heirs own the property.