Title insurance vs title theft insurance

Mary: I have been hearing a lot about people being able to forge the title to your home and take it and all this kind of stuff. I know it's tied to title insurance. Now, the reason I was thinking about it more is because they said if you've got equity in your home. My house is completely paid off, 100%, it's got lots and lots of equity, no liens or loans or seconds or anything. I was a little concerned and I'm not gullible, but you never know. When we bought the home, we had it built and everything and there was title insurance.

Tom Olsen: Mary, I get your question, so let's talk about it. First of all, let's make a distinction between title insurance and title theft insurance. Title insurance is what you get when you buy a piece of property. It is always used. It is typically paid for by the seller. It's going to ensure to you, as a buyer, that you're buying a piece of property free and clear of all liens and encumbrances. It is standard procedure. Title theft insurance is what they're trying to sell you by these TV commercials. Mary, in my opinion, title theft insurance is not needed except for one situation. That one situation where we see the theft of title happening for real estate is for vacant residential building lots. It's not going to happen on your home or your condo or your vacation home. It's happening on vacant residential building lots. If you have a vacant residential building lot, whether it's crosstown or in another county or in another state, then you may want to consider having title theft insurance on it. Nobody is going to steal the title out from under you on your home or put an equity lien against your home without your knowledge, Mary, so I am not concerned about that. Mary, does that answer your question?

Mary: Yes. The title insurance that came with the home-- because I do know I have it, it's just been a long time since I've looked at it-- is that something that helps me today in any way, or it's just in the beginning to make sure it's clear title?

Tom: It helps you today in a sense like this. If you went to sell your home and the new title company did a title search and say, "Hey, Mary, guess what? There's a judgment lien or a forged title or a defective deed way back in the chain of title, this is going to be a problem," well, your old title insurance company would be obligated to either fix that problem or pay you your financial loss. That's where your title insurance comes into play. It's good from the time you buy it through the time that you sell your property.

Mary: Okey-doke. Perfect.

Tom: Okay, Mary.

Mary: That sounds great. Now I don't have a residential law. Thank goodness.

Tom: All right, Mary, thanks for calling.

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