Q: When should you have Title Insurance?
A: You should have Title Insurance for every piece of real estate that you ACQUIRE. Whether you take title of a property through purchase or inheritance, you take on the liability that goes with that ownership.
Under the new regulations, a Title Insurance Policy can transfer to the heirs of a property. They can inherit the title along with the title insurance. However, if you receive a home or land as a gift, title insurance does not come with it, and you do not buy the title insurance policy at the purchase price of a property. You are responsible to defend your ownership should a challenge come up against it from previous owners, their heirs, or lien holders.
In these tough economic times, desperate people can do desperate things. You’re a sitting duck without feathers if you don’t have title insurance because a challenge can cost you more to defend your ownership than you can afford, unless you have an owner’s title insurance policy to cover those litigation expenses.
Q: When does your liability of real estate ownership stop?
A: When you croak. You are responsible for the title on land you’ve sold. When you sell a home or land, you transfer ownership to the buyer by warranty deed.* Don’t throw those policies away!
Title insurance protects you even after you sell. Because the contracts and the new title insurance for the buyer require you to convey with warranties, you become liable for anything that has ever transacted on the property. Hold on to that owner’s title policy, even if you let the property go.
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*Warranty Deeds are required in most Real Estate Contracts for Purchase and Sale.