So you’ve just finished putting your John Hancock on a pile of documents about five inches thick after what seemed  like an eternity from when you first set eyes on the house of your dreams.  It is also likely that the Truth in Lending Statement that the bank is required to produce so you can see how much that “dream house” is actually going to cost over 30 years, is burned into your memory.

At this point your attorney may lean over and ask if you are interested in purchasing a title insurance policy for your home and shows you yet another document with a lot of big words in tiny font, and of course a place for your signature as well as another opportunity for you to write a check.  You may think to yourself, “wait, didn’t I see a statement in that pile of papers that showed a title policy that I paid for?”  The answer is yes you did, however, that is your lender’s title policy.  Before we get ahead of ourselves, let’s first answer the burning question of what exactly is a “title insurance policy.”

A title insurance policy in a residential real estate transaction is a type of indemnity insurance that insures against defects in title for real property that may arise in the future, or to state another way, an insurance policy that will protect against any future claims by parties that they have an interest in your property.  The policy will defend against lawsuits from persons or entities that claim to have a right to the property and will reimburse the insured for any actual monetary loss incurred.

It is a 100% certainty that if you needed a loan to purchase your new home and that loan came from a bank, the bank required a title insurance policy and it was added to your closing costs.  So why would you then need to purchase another title insurance policy?

The policy that was purchased was the lender’s title policy and protects the bank’s interest in the property.  Your attorney is asking if you would like to purchase an owner’s policy that protects your interest.  Chances are at this time your financial interest in the property is fairly small as most home buyers only put a fraction of the purchase price down.  However, as time goes on and your equity in the house grows, your financial stake in the property increases.  An owner’s title insurance policy would protect this interest.

So, is it a good idea to whip that checkbook out and write yet another check in the pursuit of home ownership?  The answer is that it depends on the circumstances.  Almost all title issues are cleared up prior to the closing or else the bank would not release the funding and the title company would not insure the property.  However, it is important to remember that a title insurance policy will insure against many hidden defects that even the most thorough title review would not reveal (i.e.  deeds executed by minors or mentally incompetent persons, forged instruments, corporate instruments executed without the proper corporate authority and errors in the public records).

Christopher Stringham

Email: cstringham@mcvlaw.com

Phone: 315-471-1664

Christopher Stringham graduated from Western New England College School of Law in 2010 and was admitted to the New York State Bar as well as the United States District Court, Northern District of New York in 2011. He is a member of the New York State Bar Association, Onondaga County Bar Association, and the Injured Workers’ Bar Association of New York. He has been a member of Meggesto, Crossett & Valerino, LLP since October 2010.