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Do you really need to buy a buyer's title policy on your home?

Buying a home is a major expense. Small wonder, then, that so many first-time homeowners do everything in their power to reduce the costs associated with the purchase. While it's always a great idea to carefully go over your settlement statement before the closing, cost shouldn't be your only concern. Just because you can avoid certain fees or costs doesn't mean doing so is in your best interests.

Title insurance is one line item that many people consider eliminating. After all, there's generally already a policy in place for the mortgage if you financed the property. Paying for an owner's title policy may seem redundant, but it's actually an important form of protection for your major investment.

Title insurance protects you against outside claims

A lot of things can go wrong when you buy a home. The seller may refuse to move out, leaving you unable to take possession of the home you bought. It's also possible for someone to show up claiming ownership of your property. Even many years later, another potential owner could surface.

If someone has a legitimate claim to the property and you don't have a title policy, you could find yourself displaced. You could lose every cent you've paid toward your mortgage, from your down payment to your monthly notes over the years. A title policy protects you against defects in the title of the home that weren't found during the purchase.

Title defects aren't common, but they are expensive

Most people buy a home and never have any issues with their status as owners. For some people, however, a claim against the property could arise. Typically, financed properties have a title search performed at the request of the lender. The title company will verify who has previously owned the property and how the property changed hands.

Sometimes, however, there are issues that cause problems down the road. For example, if one heir was not consulted before the sale of a home that was part of an estate, that person could have a right of ownership. It's also possible for someone who doesn't own a property to issue a quitclaim deed to an unsuspecting buyer, rescinding rights to a property they don't actually own.

Title issues almost always wind up in court. To defend your legal ownership of the home, you will likely need an attorney. A title policy will cover that expense for you. That same policy will also protect your investment if the courts decide against you. While it's not likely you will need the coverage of a title policy, you shouldn't buy a home without it for your own protection.

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