What is title insurance and why should I pay for it?

A Massachusetts resident who is trying to purchase a home may upon reviewing their paperwork notice that they are paying several hundred dollars for title insurance on their home.

In some cases, this may be required by their bank, and so they simply pay the bill and chalk it up to an expense associated with the sale of residential real estate.

In fact, though, title insurance can be a valuable investment should title issues emerge, such that even those who don't have to purchase title insurance should consider doing so voluntarily.

Basically, title insurance recognizes that, since one cannot literally pick up land and possess it in the sense one can possess cash or even a car, there can actually be many people and businesses who claim an interest in the same plot of land at the same time.

Moreover, banks, taxing authorities, contractors and the like can legally have liens on real estate which are valid and enforceable even if the person who owes the money on the lien has disposed of the property. Sometimes, courts and administrative agencies also can create clouds on a person's title, and cities or other government authorities may have legal easements that might not even show up in the public records.

Should the owner of a new home discover that what they thought the owned outright is actually owned in part, or entirely, by someone else, it can be emotionally and financially devastating. Title insurance is there to cover many of the situations mentioned, and, upon receiving a valid claim, a title insurance company can either work to fix the title issue or compensate the owner for his or her losses.

Understanding a title insurance policy and filing a valid claim can be a tricky business, however, and it may be best to have an experience real estate attorney's assistance in doing so.

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