We are purchasing our first home. The attorney who is overseeing the sale says that we should pay for two different title-insurance policies: one for the bank, and one for us. We think that he’s just trying to sell us an “extra” insurance policy that we don’t really need. What do you think about this?

I think that the suggestion to buy a title-insurance policy to protect your own interest in the home (instead of just the bank’s) is sage advice.

Many first-time buyers, and even some experienced ones, don’t fully understand how title insurance works.

A title policy basically protects the holder from a loss sustained by a “defect in title.” For example, if you buy a house today and someone sues five years later because he has a deed to the property signed by a previous owner, the home could be taken away from you if the claim is upheld in court.

There are two types of title-insurance policies. The first, “lender’s title insurance,” protects the bank against any future claims regarding ownership of the property.

Nearly every lender requires borrowers to pay the $600 or so for such coverage, even though the policy will only reimburse the bank – not the consumer – for losses if a claim is made months or years later.

If you want the same type of protection that the bank demands, you’ll need to pay another $500 or so one-time premium for a separate “owner’s title insurance” policy that can reimburse you for your personal financial losses (and maybe even your legal fees) if a title claim proves successful.