When you buy a home or refinance one, you need a simple insurance policy that most people just won't buy…even though being without it can be deadly to your finances.

Picture this: When you do a refinance, you dump Bank A and pay them off with proceeds lent by Bank B. But what if the money is stolen while being wired from bank to bank? In many states, you could owe both mortgages—even though you were doing a refi in good faith!

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What is owner's title insurance?

The above is just one scenario where an owner's title insurance policy may have helped.

In general, owner's title insurance (aka simultaneous title insurance) protects you from the possibility that someone may come along and contest your ownership of a property. There's a big misimpression that when you buy a home, you're paying a premium for title insurance and that protects you. No! That insurance just protects the bank.

Don't rely on the title insurance the lender buys; you need your own. EntitleDirect.com sells title insurance directly and can save you up to 35%, though that figure varies widely by state. Other competitors in the marketplace include OneTitle National Guaranty and TitleForward.

Clark's brother worked as a lawyer in real estate title issues for many years and would often tell him about problems regarding disputes about proper ownership and what rights the owner has. This is something where you as an innocent homeowner, doing exactly what you should trying to buy or refinance a home, can end up being scammed.

"There was a title case a few years ago in which residents of an entire community almost lost their homes. A woman claimed she was part owner of a tract of land that later was divided to form a subdivision. She sued the homeowners in the community for a partial share of the land," Clark says.

"The woman eventually agreed to a settlement, but the homeowners spent several thousand dollars in legal fees to defend their property rights. Owner's title insurance not only protects you from loss but also requires the title company to defend you if your ownership is ever challenged."

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