Is title insurance really that important?
In recognition of National Insurance Awareness Day, let’s talk about the importance of title insurance.
When your clients are purchasing a new property, they may be looking to save money wherever they can. One of the topics that may come up is title insurance. For instance, clients may ask, “Do I really need to spend the extra money on title insurance?“
As a legal professional in the real estate industry, you know that title insurance from the right partner can mean the difference between closing smoothly and not closing at all. It offers coverage against survey and title issues/defects, as well as providing the best defense against title fraud.
For instance, Jason and June* finally found their dream home after years of saving and searching for the right property. Once financing was approved, they happily moved into their newly purchased home. Shortly after moving in, they received a notice from the city about outstanding tax and water utility charges amounting to over two thousand dollars. This was a very unwelcome surprise given their tight budget as first-time homebuyers. Luckily their lawyer had recommended they purchase a title insurance policy, which covered outstanding tax and utility bills. Because of their title insurance coverage, they were spared the extra expense when the claim was paid out by FCT.
Commercial property owners also benefit from protecting their multi-million dollar investments with title insurance as it covers issues like encroachments, zoning violations, unpaid taxes and utilities, etc. For example, a developer Jack*, purchased a golf course with plans to develop it into a larger golf course and resort. The municipality provided confirmation that the land could be developed for these purposes. Unfortunately, after closing, he was notified by the municipality that there was an error and the land was zoned as “open space/residential” and applying for re-zoning was not an option. As a result, the land could continue to be used as is but development plans could not proceed. Because FCT had insured the value of the land along with the approximate value with the improvements, Jack received a claim settlement for the loss in property value because of the zoning error. With the claim settled, he had the choice to use the property in keeping with current zoning, or sell the property without incurring a financial loss.
So does your client really need title insurance? You decide.