Why Do I Need Title Insurance?

What title insurance actually does (in one paragraph)

Unlike auto or health insurance (which cover future events), title insurance protects against past problems attached to a property’s history. You pay a one-time premium at closing. If a covered defect shows up later, the insurer investigates, pays to defend your title, and covers losses up to the policy amount, subject to the policy terms.

• Owner’s Policy → protects the buyer’s equity as long as they hold an interest.

• Lender’s Policy → protects the lender’s security interest until the loan is paid off.

  
  

“Aren’t records perfect now?” (Nope—and here’s why)

Modern systems reduce risk, but they don’t erase it. These are the repeat offenders title pros still see:

1. Human and system errorMisspelled names, transposed lot numbers, legal descriptions that omit a call—small errors, big consequences.

2. Unreleased or mis-released liensPaid mortgages that were never discharged; old HELOCs with dormant balances; state/county tax liens that attach mid-transaction.

3. Boundary, easement, and access issuesFences built over lot lines, driveways using a neighbor’s land “by permission,” undocumented private road agreements that spook lenders.

4. Probate, divorce, and authority gapsHeirs not properly vested, missing letters of authority for estates or trusts, divorce judgments that require specific conveyances that never happened.

5. Condo/HOA restrictionsBylaws that limit rentals, pets, or parking—plus unpaid assessments that can become liens.

6. Construction liens (new builds & remodels)A subcontractor goes unpaid after closing and files a lien—months after the owner moved in.

7. Fraud & impersonationSophisticated seller-impersonation rings target vacant land and rentals; notaries and buyers can be duped despite “clean” paperwork.

8. Data mismatchesCounty systems, recorder indices, tax databases, and mapping layers don’t always agree. A deed can be recorded but indexed wrong; a parcel ID can change without a clean audit trail.

   
   

Why you still want an Owner’s Policy (even if you get a loan)

A common misconception: “If there’s a lender policy, I’m covered.” Not true. The lender’s policy makes the lender whole if a covered defect affects their collateral. The owner’s policy protects your equity and your legal right to the property. If something goes sideways, you want a company with a duty to defend you, not just your bank.

What “good” title work looks like before closing

A strong title company will:

• Search the chain of title far enough back to catch breaks, wild deeds, and out-of-chain instruments.

• Verify parties and authority (estates, trusts, LLCs) with the right supporting docs.

• Clear requirements (payoffs, releases, corrective deeds, affidavits).

• Read and summarize exceptions (easements, restrictions, condo docs) so buyers and lenders understand practical impact.

• Flag survey issues and recommend the right level of survey/inspection for the deal.

Even then, hidden defects can remain. That’s why the policy matters.

Real-world scenarios where coverage saves the day

• The “forgotten” HELOC: A prior owner’s line of credit was never closed. Years later, the lender resurfaces demanding payment. Your policy’s claim team gets it released.

• The boundary surprise: A new survey shows the garage nudges across the line. The insurer negotiates a boundary agreement or compensates for loss in value.

• Probate gap: A deed from an heir turns out invalid because the estate wasn’t properly opened. The insurer funds curative work (or litigation) to perfect title.

• Seller impersonation: A fraudster sold a vacant lot with forged ID and fake notary. The real owner appears; your policy backs you while the insurer pursues the bad actor.

  
  

Michigan-specific items:

• Chain length & quirks: Michigan practice commonly targets a ~40-year chain; older plats and metes-and-bounds legals can hide surprises.

• Taxes & judgments: State tax liens and district court judgments can attach unexpectedly—thorough searches matter.

• Condominiums: Master Deed/Bylaws often restrict rentals and use; lenders care, and buyers should too.

• Waterfront parcels: Riparian/littoral rights, accretion/erosion, and shared access easements require careful reading.

• New construction: Sworn statements and lien waivers aren’t optional paperwork; they’re your lien shield.

(This is general education, not legal advice. Always review the actual commitment and policy language.)

Cost vs. value (the one-time premium question)

• One-time cost at closing vs. years of protection.

• Includes the insurer’s duty to defend—lawyers and court costs add up fast.

• Peace of mind for resale and refinance: future buyers and lenders will scrutinize your chain, too.

  
  

How to stack the deck in your favor (policy + best practices)

• Buy an Owner’s Policy at purchase (even cash deals).

• Ask for a plain-English summary of Schedule B exceptions and condo/bylaw highlights.

• Consider a survey appropriate for the property and risk tolerance.

• Follow wire-safety instructions to avoid fraud at closing.

• Keep your policy jacket and final owner’s policy in a safe, easily retrievable place.

Bottom line

Technology improves closings—but it doesn’t erase human error, conflicting documents, or bad actors. Title insurance remains the simplest, most cost-effective way to protect your home’s equity and your right to own it.

Pass the Michigan Title Insurance Producer Exam—on your first try. Join our self-paced exam prep class with quizzes, checklists, and real-world scenarios.