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What is title insurance and why you should get it

Not too long ago, I was talking with an attorney friend of mine who is a claims counsel for a major title insurance company. He has been practicing for more than 30 years, and he is full of great real estate stories. Some are funny, and others, like this one, are scary.

He told me about a recent conversation he’d had with a homeowner. The homeowners received a certified letter from an attorney representing a claimant who alleges that he is the true owner of their property. The basis of the claim stems from an old probate on an estate that was not handled correctly. All of the heirs did not receive notice, as the story goes.

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In a panic, understandable in these circumstances, one of the homeowners called my friend for advice. The homeowner recalled having an attorney at closing and said there was a lawyer there representing the bank providing the new mortgage. The homeowners tried to track both of them down.

Strike one.

The attorney who represented the homeowner is dead.

Strike two.

The lawyer who was there on the bank’s behalf is in jail for money laundering. After this heart-sinking news, my friend ask the homeowner whether he had purchased title insurance.

A few days later, the homeowner located the paperwork signed at closing, documents that confirmed that he did not buy the insurance.

Strike three.

“Oh, no,” my friend said.

“Wait, what’s wrong? We were told that we don’t really need a separate policy for ourselves.”

Are they out?

This story isn’t over yet, but things are not going well for the homeowners. They will have to defend the suit using their own financial resources because they did not purchase the optional owner’s coverage when they bought their home.

Consistent with my charge of educating you on legal matters, dear reader, I am going to outline the basics of title insurance:

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■  Title insurance is a contract that provides coverage if there is a claim on your property title.

■  In the context of a residential real estate transaction, there are two types: lender’s and owner’s policies.

■  The lender’s policy protects the bank if there is a claim on your title, and the owner’s policy covers you.

■  If you refinance your home and you got your owner’s policy when you first purchased your house, your coverage will remain in effect.

If you’re buying a home, shell out the money for title insurance. It’s worth the peace of mind.


Hugh Fitzpatrick is the founding partner of New England Title and Fitzpatrick & Associates PC, a Tewksbury-based law firm specializing in real estate conveyancing. Send your questions to Address@globe.com.