One of the most important kinds of home insurance you can buy has nothing to do with protecting you against a fire or a hurricane. It won’t pay for the doctor’s bill if a neighbor trips in your yard and breaks his leg, nor will it protect you against a swimming pool accident. And yet, it is one of the most vital forms of insurance you can carry on your home.

I’m talking about title insurance, and I am amazed at the number of home buyers who ignore this critical form of protection. Whether from ignorance or simply a lack of interest, many home buyers choose not to purchase this type of coverage, and I can hardly believe it.

So let’s spend some time today talking about title insurance and you. My goal is to either scare you to death or make you glad you bought this coverage when you did.

To begin, we should know that title insurance is unlike other kinds of insurance. With hazard insurance and life insurance, you are protecting yourself against things that may happen in the future. Title insurance is exactly the opposite, protecting you against things that may have happened in the past to the ownership record of your property.

When you buy a piece of real estate in Georgia, you typically take ownership in the form of a deed. Most often, that deed is a General Warranty deed. And in a nutshell, that deed is a promise from the seller to you saying "I own this property free and clear, and I am selling it to you, and I guarantee forever to defend your claim of ownership."

That seems simple enough. If Mr. Seller has owned the property for any length of time, he would certainly know about any problems in the chain of ownership, wouldn’t he? And of course, we can trust him to be honest with us, can’t we?

Well, no.

It’s not that Mr. Seller is a crook or that he is not telling us all he knows, it’s just that things can happen that no one anticipated. And if that happens, and if Mr. Seller is no longer around (or even alive), then the problem may become your problem, and even worse, the problem may become extremely expensive.

Let’s take an example of what can happen:

You bought your home from Mr. Seller last year. Since then he has passed away with no estate. It turns out that Mr. Seller bought seven years earlier from Mr. Prior, now deceased, and that Mr. Prior bought a few years earlier than that from a Mr. Johnson, who had been in the house since it was built in the 70's.

And it turns out that Mr. Johnson had a second wife who lived with him in the house before she passed away. In fact, this Mrs. Johnson had a daughter from a previous marriage that Mr. Johnson didn’t much care for. And even though this Mrs. Johnson was half owner of the house when she died, Mr. Johnson simply decided to sell and move away quickly to avoid inter-family hassles. He sold the house for cash to Mr. Prior, a longtime neighbor who didn’t like to use lawyers. Johnson can no longer be found.

And now Mrs. Johnson’s long-lost daughter shows up at your door asking about what happened when the house was sold and who owns it today.

The bad news is this: there is a very good chance that you are a 50-50 joint owner of the house with Mrs. Johnson’s daughter.

Another example of a title disaster:

You buy a new home from Mr. Builder, who is all smiles at closing. At the table, he signs a Warranty Deed granting ownership of the house to you. The closing attorney mails the deed to the local County Clerk of Superior Court.

Six weeks earlier, the IRS filed a tax lien against Mr. Builder and his property for $100,000 in unpaid taxes, and delivered the lien directly to the courthouse. But because some Georgia counties are experiencing remarkable delays in the recording process, the lien was not "of record" when the ownership title was checked. Your house is now subject to the $100,000 tax lien. And you may not even find out about this until you try to sell or borrow years later.

Yes, you could try to sue the builder, except that he cashed your check and ran off to Mexico with all the money. And no, the attorney who closed the deal is not responsible, because the IRS lien had not yet been indexed when he checked the records.

In each of the above situations, you are put in the extremely awkward position of trying to negotiate with a third party over who owns what. And because the claims appear valid, you may very well have to pay off the other side in order to clear the title on your own home.

In these and similar situations, the buyer could have easily protected himself by purchasing owners title insurance.

Next week we will look in detail at the range of issues addressed by owners title insurance, find out how much it costs, and learn which metro Atlanta counties have the greatest potential for title disasters.