Title Insurance
Title insurance protects buyers and lenders against financial loss from defects in a property's title that existed before closing—like unknown liens, fraud, forgery, or errors in public records. Unlike other insurance, you pay a one-time premium at closing and the policy remains in effect as long as you own the home.
There are two types of title insurance: a lender's policy (required by virtually all mortgage lenders) and an owner's policy (optional but strongly recommended for buyers). The lender's policy protects the lender's interest—not yours. If a title defect arises, the lender's policy covers the lender; without an owner's policy, you could lose your home and still owe the mortgage.
Owner's title insurance typically costs 0.5–1% of the purchase price—a one-time fee of $1,500–$3,000 on a $300,000 home. The policy covers the full purchase price and remains in effect forever (as long as you own the home). For a one-time premium, it's generally considered excellent value given the potential losses it covers.
Title insurance has covered claims as varied as a contractor's lien for $15,000 in unpaid work discovered after closing, a forged deed where the previous 'owner' didn't actually own the property, an undisclosed easement that limited the buyer's ability to build an addition, and estate challenges from unknown heirs. The title company defends these claims on your behalf, at their expense.
Key Takeaway
Title insurance protects buyers and lenders against financial loss from defects in a property's title that existed before closing—like unknown liens, fraud, forgery, or errors in public records. Unlike other insurance, you pay a one-time premium at closing and the policy remains in effect as long as you own the home.
Related Terms
Frequently Asked Questions
No, only the lender's policy is required when getting a mortgage. But the owner's policy is highly recommended—it's a one-time premium that protects your full equity against hidden title defects. The cost is typically 0.5–1% of the purchase price.
The lender's policy protects the bank's interest (up to the loan amount). The owner's policy protects your equity (up to the full purchase price). If a title defect is discovered, without an owner's policy, you could lose your home while still owing the mortgage.
Generally yes—RESPA gives you the right to shop for title services. Ask your real estate agent or lender for a referral, but you're not required to use any specific company. Compare premiums and coverage.
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