Excuses for Waiving Title Insurance

Every year, a handful of purchasers come up with excuses for waiving title insurance.  Our website provides many explanations of title insurance and why it is important, but here are a few of the most common excuses for waiving the owner’s title insurance coverage.

“The sellers have lived there for 25 years.   If there was a problem, it would have come up before.”

Owning a property for a long time does not mean that a lien or title defect does not exist.  Often a title defect is only discovered upon the transfer or sale of a property.

“This is a new condo unit, so there’s no reason for title insurance.”

New houses or condos are not suddenly new properties.  The underlying property has existed for hundreds of years.  That prior history attaches to the new property.  Plus, mechanic’s liens and building permits, both of which are covered under an enhanced policy, are more likely on new construction.

“I know the sellers and they seem like a nice couple.  I’m sure we can trust them. “

Liens and title defects are often not intended but are mistakes in the chain of title.  Consequently, most issues have nothing to do with the sellers’ character but more to do with the circumstances.

“Since I’ve only put a few thousand down, I have no equity and no reason to get title insurance.”

At first glance, this may sound logical: if a purchaser has put little to nothing down, then the purchaser has little or nothing to lose.  However, with each monthly mortgage payment, the homeowner is paying down some principal and increasing equity.  Without Owner’s Title protection, that ever increasing equity is unprotected.

“Since I’m paying cash and not getting a loan, I don’t need to waste money on title insurance.”

This logic is completely backwards.  The potential loss to a cash purchaser is 100% equity.   This is the most obvious example of when title insurance should be purchased.

Excuses for waiving title insurance often make no sense when you consider that title insurance is a one-time investment that protects you from a long list of potential issues.  The money saved is just not worth the risk.