Second Title Insurance Policy?I'm buying a home. At closing, I was told I should consider buying a second title insurance policy because the one I was required to purchase by my lender only covers the lender for claims and does not cover me. I'm told this will cost me about ¾ of what I already paid for the first policy. Why do I need this second policy and is this a reasonable price for insuring the same thing - that I have a free and clear title?
Answer: Every lender will have unique requirements for a mortgage or loan. From my standpoint, it sounds as if you have a smart lender. Free and clear title is as important to them as it should be to you.
While you may not like buying a second policy, the issue is really ensuring that you don't get hit with the costs of correcting the title if it is not free and clear. Now, the chance that there is a problem with the title is relatively low – but that doesn't mean that it doesn't happen.
Normally, the biggest issue with title is that it is properly documented. If it's properly documented, then the policy which you've purchased for the lender will be sufficient. The lender wants the title properly documented too! However, if there are liens or other problems that don't affect the lender directly, but do affect you (because you would have to pay them) then the single policy will not be sufficient.
Insurance is about risk management. Are you a gambling man? If you are, you might decide to forego this insurance for yourself. However, keep in mind that the cost of the insurance, while an annoyance, is a very small percentage of the cost of your home.