Can you imagine losing your home because someone else has a legal claim to it? It’s rare—but it happens. In fact, a significant percentage of title searches uncovers an issue that could affect property ownership. While many of these problems are resolved before closing, some remain hidden until it’s too late. That’s where Owner’s Title Insurance comes in.
The Real Risk Behind Hidden Title Defects
Title defects can include anything from clerical errors and undisclosed heirs to unpaid liens or forged documents. These issues can threaten your legal ownership and cost thousands in legal fees—or worse, your home.
The following story, though hypothetical, is based on real scenarios that have led to more than 800,000 cumulative paid title insurance claims* across the industry.
Betty’s Story: A $20,000 Mistake
Betty Buyer, a recent widow, purchased a $100,000 home using $50,000 of her savings and a $50,000 loan. Her lender required a Loan Policy of Title Insurance (commonly referred to as a lender’s policy), which protects the lender’s interest—but Betty declined to purchase an Owner’s Policy for herself. Three weeks after moving in, Betty received devastating news: a $20,000 judgment lien had been recorded against the property just before her purchase. The lien stemmed from a lawsuit against the seller, Sammy, who had since left the country.
Because the lien on Sammy’s property was recorded before Betty’s deed, the creditor could legally foreclose on her home to recover the debt. Betty’s lender’s policy did not cover her personal investment, and without an owner’s policy, she had no legal protection or financial recourse. Betty now faced the impossible choice of paying the $20,000 herself—or losing her home.
What Went Wrong?
The lien was a judgment lien from a civil lawsuit, one of several types of legal claims that can be placed on a property. Others include:
- Mechanic’s Liens – for unpaid contractor work
- Tax Liens – for unpaid property or income taxes
- Homeowner’s Association (HOA) Liens – for unpaid dues or assessments
These liens are recorded in the public record, but they can be missed during the title search due to clerical errors, improper filings or timing. In this case, the judgment lien against the prior owner was recorded after the title search was conducted, but before the transfer of property ownership was finalized, giving Sammy’s creditor a prior stake in Betty’s property.
How Owner’s Title Insurance Protects You
When you buy a home, your lender requires a Loan Policy of Title Insurance to protect their investment. But that policy doesn’t protect your ownership—only an Owner’s Policy of Title Insurance does that.
An owner’s policy:
- Protects you from financial loss—including defense costs and legal expenses—if your ownership is ever challenged due to covered title defects, such as undiscovered liens that existed prior to your property purchase, up to the policy limits.
- Stays in effect as long as you or your heirs own the property.
- Is a one-time cost, typically less than your annual auto insurance premium.
The Cost of Skipping Coverage
In 2024 alone, the title insurance industry spent over $673 million defending homeowners and paying claims. Without coverage, homeowners like Betty are left to fend for themselves—often at great personal and financial cost. Buying a home is the biggest investment most people ever make. Skipping owner’s title insurance to save a few bucks can be a gamble with life-changing consequences.
Final Thoughts
Title insurance may not be top of mind when buying a home, but it should be. It’s a small price to pay for peace of mind and long-term protection. Don’t let a hidden title defect turn your dream home into a legal nightmare.
To learn more about how an Owner’s Policy of Title Insurance can protect your property rights, contact your local Old Republic Title representative or agent. With over a century of experience and a claims-payment ratio among the industry’s best we’re here to help you safeguard your investment.
* Based on combined Form 9 Annual Statements for all insurers within each family, as compiled by the American Land Title Association (ALTA) in the 2024 American Title Insurance Industry Data Book.