Understanding the Purpose of Title Insurance

What are the uses of title insurance?

Carl Zoellner, Esq. explains the different scenarios you may need title insurance and why it’s important.

There are tons of questions regarding title insurance, what it’s for, how to use it, and how complicated it is to work with. 

And the answer to all of those is: maybe, kind of, and depends. 

So, let’s get into it. 

What’s the purpose of title insurance? 

The purpose of title insurance is to ensure the title or ensure the chain of title of a given property. 

If an issue occurs with the chain of title—or if somebody suddenly claims, “No, no, no, I own that property”—there’s an insurance policy in place that can then defend against that action. 

This title insurance can also make the title or the insurance holder whole, should there be some sort of claim or adjustment with the property that would cause a loss. 

Often with title insurance, you have both the mortgage holder who has a policy, as well as the individual who purchased the property. 

Common issues you can run into tend to be with the title insurance companies themselves, especially if you’re coming from the real estate investor side of things. 

Having purchased the property personally and then trying to change your title insurance policy over to your land trust or an LLC can sometimes cause complications. 

The overall suggestion here, just like with any type of insurance, is you’re going to need to work with your insurance company to find the best solution for you. 

You can most often resolve any issues by making the LLC or trust named an additional insured. 

Keep in mind, if you have a land trust, your land trust is in the same grouping as a living trust or the same family as a living trust. 

So it may benefit you to ask that title insurance company or the agent you’re working with, “If I was in a living trust, would you be able to ensure, should you have title insurance on this property?”

And should they say yes, that may provide you a route to a solution. Or if you’re using an LLC, I would ask, “Okay, so if the LLC is a beneficiary and you have a product where you would have title insurance for a business entity, should a business entity be purchasing a property?” 

That may provide you a route to a solution as well. 

So it’s like any other sort of organization when you’re dealing with folks. You can’t go in assuming they understand real estate investing or your overall asset protection strategy, so you need to load those questions in a way that’s easy for them to understand. 

The Takeaway

So that’s title insurance. A quick summary, if you’re getting title insurance and you’re having some hiccups or trouble insuring your investment properties, work with your insurance agent to try to find a solution. 

On the other side, you may have to shop for different insurance companies. Be sure to frame the questions you’re asking them differently because they may not understand what you’re asking. 

As always, if you have more questions and you are a Platinum client, please feel free to reach out. We’re always happy to chat with you as Platinum clients. If you’re not yet a client and have additional questions, we’d encourage you to set up a FREE Consultation. 

We offer free consultations, and we’re happy to draw you out a Wealth Planning Blueprint of what you’re doing or what you plan to do so you at least have our suggestions on deck. You can claim a completely FREE consultation as a subscriber online or by calling 888.871.8535.

And if you’ve got some requests, you can always put them in the comments section, and we’ll take a look at those too. 

Until next time, thank you for joining me for this episode of “Coffee with Carl.” We will catch you on the next episode. 

Stay safe out there and have a good one.