What Is Title Insurance?

Title insurance is a form of indemnity insurance that protects property buyers and mortgage lenders against financial loss from defects in a property's title — problems with the chain of ownership that existed before you purchased the property but were undiscovered at closing.

Unlike most insurance, which protects against future events, title insurance protects against past events — problems that occurred in the history of the property's ownership, sometimes decades earlier.

What Title Insurance Covers

Unknown liens — a prior owner may have failed to pay taxes, a contractor may have filed a mechanic's lien, or a judgment creditor may have a lien that was not discovered in the title search.

Ownership disputes — a prior deed may have been forged, signed without authority, or executed by an owner with mental incapacity. Heirs of a prior owner may claim an interest not known at the time of purchase.

Errors in public records — mistakes in recording deeds or mortgages can cloud title.

Undisclosed easements — a neighbor or utility company may have a legal right to use a portion of your property not disclosed before closing.

Owner's Policy vs Lender's Policy

Lender's title insurance protects the mortgage lender for the amount of the outstanding loan. Your lender will require you to purchase this as a condition of the loan. It protects the lender — not you.

Owner's title insurance protects you, the buyer. It covers the purchase price and protects your equity. It is not required by law but strongly recommended. The premium is a one-time payment made at closing, and the policy protects you for as long as you or your heirs own the property.

How Much Does Title Insurance Cost

A typical owner's policy on a $500,000 home costs $1,000-$2,000, paid once at closing.