Title insurance is a one-time policy that protects real estate buyers and lenders against financial loss from defects in a property’s title that existed before closing but were unknown at the time of purchase. Unlike other insurance that covers future risks, title insurance covers unknown past issues—such as unpaid liens, forged documents or competing ownership claims—that could threaten your legal right to the property.
The core purpose of title insurance is to ensure clear ownership. Before issuing a policy, an insurer orders a thorough title search to identify liens, judgments or disputes. If defects surface after closing, the insurer covers legal defense costs and any covered loss up to the policy limit, preserving your investment and peace of mind.
A title search reviews public records for liens, easements or ownership disputes. A title defect is any hidden issue—like an unpaid tax lien or forged signature—that jeopardizes ownership. A title commitment is the insurer’s promise to issue a policy once identified issues are cleared.
Hidden liens—from contractors, taxing authorities or previous mortgages—can surface after closing, leaving you responsible for debts you never incurred. Title insurance steps in to pay these liens or defend you in court, shielding your investment from fraud and unpaid obligations.
Lenders rely on lender’s title insurance to protect the mortgage amount if a covered defect reduces the property’s value or triggers legal costs. This coverage stays in effect until the loan is paid off, ensuring the lender’s collateral remains clear.
By uncovering title issues early through a title search and clearing them before closing, title insurance prevents last-minute surprises, avoids closing delays, and reduces the risk of costly disputes after you take ownership.
An owner’s policy protects you—and your heirs—for as long as you or your heirs own the property. Coverage includes legal defense and compensation up to the purchase price for covered defects such as unknown heirs or forged documents.
A lender’s policy safeguards the mortgage lender for the loan amount. It kicks in if a title defect impacts the lender’s security interest. Coverage lasts until the mortgage is paid in full or refinanced.
Customarily, buyers purchase the owner’s policy, while lenders require—and buyers also pay for—the lender’s policy. Together they ensure both parties are fully protected.
Standard coverage includes forged deeds, false affidavits, undisclosed heirs claiming ownership and unrecorded easements that restrict your use of the land.
Title insurance generally excludes zoning violations, environmental contamination, building code compliance and any issues arising after the policy date—such as new liens or future boundary disputes.
Title insurance regulations and premium rate caps differ by state. Some states mandate specific endorsements, while others set maximum fees based on purchase price or loan amount. Always verify local rules before closing.
Owner’s policy premiums are based on the home’s purchase price; lender’s policy premiums are based on the loan amount. Rates typically run 0.5%–0.7% of these values but vary regionally.
You pay a single premium at closing; there are no ongoing or annual fees. Coverage lasts as long as you (or your heirs) own the property—or until the mortgage is paid.
While rates can vary, many states cap premiums. If you refinance, you may be eligible for a partial refund or discounted endorsement covering the new loan amount.
Obtain multiple quotes, ensuring each includes the same coverage and endorsements. Don’t choose solely on price—verify the insurer’s reputation and claims-paying ability.
Key questions: What exceptions and endorsements are included? How quickly do you resolve claims? Are there any hidden service or recording fees?
Extremely low quotes may omit essential coverages or tack on hidden fees. Ensure all closing costs are disclosed upfront.
Sarah bought her first home without knowing about a contractor’s lien from the previous owner.
During the title search, an unpaid tax lien of $8,000 surfaced. Without title insurance, Sarah would have had to pay it herself or risk a clouded title.
Sarah’s owner’s policy paid off the lien and covered legal costs, allowing her sale to close on time and saving her $8,000 in unexpected debt.
While lenders require a lender’s policy, an owner’s policy isn’t legally mandatory—but it’s strongly recommended to protect your equity.
Yes. A lender’s policy only covers the mortgage amount. An owner’s policy protects your full purchase price and equity.
Your title insurer defends you in court and pays covered losses up to the policy limit, including legal fees.
Possibly. Some insurers offer partial refunds or endorsements for a reduced premium when you refinance with the same company.
An owner’s policy lasts as long as you or your heirs own the property. A lender’s policy lasts until the mortgage is paid off.
Title insurance is essential for protecting buyers and lenders from hidden title defects, unknown liens and legal disputes that could jeopardize ownership.
Contact multiple licensed title companies, request detailed rate quotes with endorsements, and compare coverage, exclusions and fees side by side.
Visit your state’s department of insurance website for rate charts, sample policies and consumer guides. Consult a real estate attorney or experienced title agent for personalized advice.