What Title Insurance Covers
Title insurance protects against defects in a property's title — problems with the legal ownership chain that existed before you bought the home but were not discovered during the title search. These defects can surface months or years after closing.
- Unknown liens — Unpaid contractor bills, tax liens, or court judgments filed against a previous owner
- Forged documents — Fraudulent deeds, forged signatures, or impersonation in the chain of title
- Undisclosed heirs — Missing or unknown heirs who claim ownership rights to the property
- Recording errors — Clerical mistakes in public records, incorrect property descriptions, or filing errors
- Boundary disputes — Encroachments, survey errors, or conflicting property descriptions
- Fraud and forgery — Previous owners who did not have the legal right to sell the property
Owner's vs Lender's Title Insurance
There are two types of title insurance, and understanding the difference is critical for buyers.
Lender's Title Insurance (Required)
Protects the mortgage lender's financial interest in the property. Required by virtually every lender. Coverage equals the loan amount and decreases as you pay down the mortgage. Reaches zero when the loan is paid off. Does NOT protect the buyer's equity at all — only the lender's investment.
Owner's Title Insurance (Optional but Recommended)
Protects the buyer's full equity in the property. Coverage equals the purchase price and lasts as long as you or your heirs own the home. One-time premium paid at closing — no recurring payments. If a covered title defect surfaces, the insurance company pays legal defense costs and covers financial losses up to the policy amount.
The Title Search Process
Before issuing a policy, the title company conducts a thorough search of public records to identify any problems with the property's ownership history. This is a critical step that catches most issues before closing.
- Deed chain review — Traces ownership back decades to ensure every transfer was legally valid
- Lien search — Checks for unpaid mortgages, tax liens, mechanic's liens, and judgment liens
- Court records — Looks for lawsuits, divorces, probate proceedings, or bankruptcy filings involving the property
- Tax records — Verifies all property taxes are current and no delinquent taxes exist
- Survey review — Confirms property boundaries match the legal description
The search typically takes 1-2 weeks. If issues are found, they must be resolved before closing can proceed. Common resolutions include paying off old liens, obtaining releases from previous lenders, or correcting recording errors.
Title Insurance Costs
Title insurance is a one-time premium paid at closing — there are no monthly or annual payments. The cost varies by state and property value.
- Owner's policy — Typically 0.5-1% of the purchase price. On a $350,000 home, expect to pay between $1,750 and $3,500
- Lender's policy — Usually 0.5-1% of the loan amount, often slightly less when bundled with the owner's policy
- Simultaneous issue discount — Buying both policies at the same time from the same company typically saves 10-40% on the lender's policy