As your home increases in value, should you increase your title insurance coverage?

Paul: Tom, when you buy title insurance, the cost is based on the value of the property at the time of the title insurance.

Attorney Tom Olsen: Exactly.

Paul: What happens, say 20 years down the road, when that property has inflated to two or three times the value that you placed on it when you bought the title insurance?

Tom: You got a problem. If you bought your house many years ago for $200,000, you got a $200,000 policy that's good as long as you own it. If you go to sell it, you going to sell it for $500,000, and all of a sudden there's a problem with the title that cannot be fixed, well, the limits to your policy are $200,000. I'm not overly concerned about this issue, Paul, but you're right. Your policy limits are not increased over time.

Paul: It's not like home insurance, where you get a bill every year saying it's increased 5%, you owe us more money. Once you pay the premium, it's good forever?

Tom: It's good for as long as you own it. It's a one-time premium, Paul. If that's really of concern to you, you could certainly buy a updated policy if you wanted to increase your coverage to what the value of your house is. I don't think that's necessary, but if it'd make you sleep better at night, Paul, that's something you could do.

Paul: Now, the question was on the inflation, so you only covered for the initial value of the policy when you bought it.

Tom: You got it, Paul.

[00:01:20] [END OF AUDIO]