We have a lot we bought 40 years ago for $25,000 and obtained Title Insurance in escrow. Over the years we built a house (didn't take out a loan) and the value of the house and lot is in excess of $800,000 today. The question is: How big a risk is it to have an $800,000 house with $25,000 worth of title insurance?

You need title insurance for when you purchase any new real estate. Since you've owned this property for 40 years I don't see why you would need title insurance any longer. Now, if there were a buyer for your property then the buyer would need to get their own title insurance policy taken out. Right now your title insurance policy is moot.

The purpose of title insurance is to guarantee that you are getting clear title to the property. The amount of the coverage is for the costs of defending the title, not necessarily covering your loss if the title is not clear.

As twinkle said, its unlikely that a challenge to your title will be mounted so the insurance is superfluous.

Maybe you don't mean title insurance? It's cheap and not part of escrow. Do you mean mortgage insurance? I can't think what else it could be. And it equals the amount you paid for the property, so that would make more sense.

What you need now is a homeowner's policy. It covers the house, contents, maybe trees/storm/flood/outbuildings, and liability.

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Originally Posted by Sather

... How big a risk is it to have an $800,000 house with $25,000 worth of title insurance?

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Tiny. If someone were to sue you claiming that, 40 years ago, before you bought ti, he had a lien on the property, he has a major statute of limitations problem.