Do I need title insurance?

[Hemal Adani]

Hello, I have mortgage on a property. Lender has ordered and received lender's title insurance. Do I owner's title insurance as well? Should I get one after mortgage is paid off?

[Tom Gimer]

Quote from @William Anderson:

If you are going to hold for 30 years and sell before the property is paid off then you do not need owner's title insurance.  You will be covered by the lender's policy while the mortgage is in place.  

If you intend to pay it off soon and retain the property then it's a gamble if you should have it or not. Years ago, I sold a property with a VA loan guarantee that stayed with the property. A few years later I tried to finance with a VA loan and learned that the guarantee was still in place even when I knew the person I sold it to had resold it.

You can not keep the VA guarantee to a third party or second buyer.

I went to the house and knocked on the door.  The owner opened it and I explained that he was living in my house.  He was shocked.  I explained that he needed to contact his title insurance company and clear it up in two days while I was in town or my Attorney would evict him.

The next day the title insurance company representative met me and gave me a copy of the stamped reconveyance.  Had this not been taken care of, I would have taken the house.  Since I am a nice guy, the buyer was able to keep it.

Had there not been a title policy on the house that the mortgage company ordered, it would have been a problem.  The same problem you could have if the lender is paid off and you are without a policy.  Just FYI.

Can the existence of a lenders policy help resolve a title defect in favor of the owner? Sure, it happens.

But to suggest that owners coverage is unnecessary when there is a lenders policy in effect is bad advice. I can think of many situations where a lender’s insured lien would be unaffected while an owner’s interest requires legal action to defend. Guess who pays legal when owners coverage is declined.

Lenders and owners policies cover different risks.