title insurance is a one-time policy that protects against financial loss from defects in a property’s title—like unknown liens, ownership disputes or recording errors. lender’s title insurance (required) protects your mortgage lender. Owner’s title insurance (optional but recommended) protects you. Policies cost $1,000-$3,500 depending on home price and location, paid once at closing.
What Title Insurance Protects Against
Title Defects and Claims
Title insurance covers problems with property ownership that weren’t discovered during the title search:
Liens:
- Unpaid property taxes
- Contractor liens (mechanic’s liens)
- HOA liens
- Judgment liens from lawsuits
Ownership issues:
- Forged documents in the chain of title
- Unknown heirs who claim ownership
- Errors in public records
- Missing signatures on deeds
- Improperly recorded documents
Fraud:
- Forged deeds
- Identity theft
- Fraudulent sellers
Legal disputes:
- Boundary disputes
- Easement conflicts
- Undisclosed encumbrances
Real-World Examples
Example 1: Marcus bought a home. Two years later, a contractor who worked for the previous owner filed a mechanic’s lien for $15,000 in unpaid work. Title insurance covered the claim and legal fees.
Example 2: Jennifer discovered after closing that a previous owner’s divorce decree wasn’t properly recorded and the ex-spouse claimed partial ownership. Title insurance paid for legal defense and settlement.
Example 3: A forged deed in the 1990s meant the “seller” didn’t actually own the property. Title insurance covered the buyer’s loss and legal costs.
Two Types of Title Insurance
Lender’s Title Insurance
Who it protects: Your mortgage lender
Required? Yes, by virtually all lenders
Coverage amount: Loan amount (decreases as you pay down mortgage)
Who pays: Buyer (in most states)
Cost: $500-$1,500 typically
Duration: Until loan is paid off
Owner’s Title Insurance
Who it protects: You, the homeowner
Required? No, but strongly recommended
Coverage amount: Purchase price (stays constant)
Who pays: Varies by state (buyer or seller)
Cost: $500-$2,000 typically
Duration: As long as you (or your heirs) own the property
Why You Need Both
Lender’s policy only protects the lender. If a title issue arises:
- Lender’s policy covers their loan balance
- Without owner’s policy, you’re unprotected
- You could lose your entire equity
Example: You buy for $400,000 with $80,000 down. A title defect voids the sale:
- Lender’s policy covers: $320,000 (their loan)
- Without owner’s policy, you lose: $80,000 (your down payment plus equity)
What Title Insurance Costs
Pricing Factors
Title insurance rates depend on:
- Home purchase price
- State regulations (some have set rates)
- Policy type (lender’s, owner’s or both)
- Reissue rates (discount if recent policy exists)
Typical Costs by Price
| Home Price | Lender’s Policy | Owner’s Policy | Combined |
|---|---|---|---|
| $200,000 | $600 | $800 | $1,200 |
| $300,000 | $800 | $1,100 | $1,600 |
| $400,000 | $1,000 | $1,400 | $2,000 |
| $500,000 | $1,200 | $1,700 | $2,400 |
Note: These are estimates. Actual costs vary by location.
Who Pays for Title Insurance?
Varies by state and local custom:
Buyer pays (common in): Most states for lender’s policy
Seller pays (common in): Many states for owner’s policy
Split (common in): Some states split costs
Negotiable: Can be negotiated regardless of custom
The Title Search Process
What Happens Before Insurance
Before issuing title insurance, the title company conducts a search:
Chain of title review:
- Traces ownership back 50+ years
- Verifies each transfer was legal
- Identifies any breaks or gaps
Lien search:
- Property tax liens
- Mortgage liens
- Judgment liens
- Mechanic’s liens
- HOA liens
Encumbrance search:
- Easements
- Restrictions
- Covenants
- Encroachments
Public records review:
- Court records
- Tax records
- Probate records
- Divorce records
What the Search May Find
No issues: Clear title, insurance issued
Minor issues: Resolved before closing (missing releases, recording errors)
Major issues: May delay closing or kill deal (ownership disputes, significant liens)
What Title Insurance Does NOT Cover
Exclusions
Known defects: Problems disclosed before policy issue
Post-policy issues: Problems that occur after you buy
Zoning violations: Land use issues aren’t covered
Environmental hazards: Contamination, pollution
Government actions: Eminent domain, regulatory changes
Survey issues: Boundary disputes from inaccurate surveys (without enhanced coverage)
Enhanced Policies
Enhanced or extended policies cover more, including:
- Post-policy forgery
- Building permit violations
- Zoning conflicts
- Encroachment issues
- Some survey-related problems
Enhanced policies cost 10-20% more than standard policies.
Filing a Title Insurance Claim
When to File
Contact your title insurance company if you discover:
- Someone claims ownership of your property
- A lien you didn’t know about
- A boundary dispute arises
- Recording errors affect your ownership
- Fraud related to the title
The Claims Process
- Notify the title company: Contact them as soon as you’re aware of an issue
- Provide documentation: Share any notices, legal documents or correspondence
- Investigation: Title company investigates the claim
- Defense: If claim is covered, they provide legal defense
- Resolution: Settlement, litigation or payment depending on situation
What the Policy Covers
Legal defense: Attorney fees to defend your ownership
Settlement: Costs to resolve valid claims
Loss payment: If you lose the property, payment up to policy amount
Title Insurance for Refinancing
New Policy Often Required
When you refinance, lenders typically require a new lender’s title policy.
Why? New liens or issues may have arisen since you bought.
Reissue Rates
If your original policy is relatively recent (usually within 5-10 years), you may qualify for a discounted “reissue rate”—typically 30-50% off.
Ask about:
- Reissue rate based on existing policy
- Using the same title company for discount
- Timing requirements
Do You Need New Owner’s Policy?
Generally no. Your original owner’s policy continues to protect you. Only the lender’s policy needs renewal.
Shopping for Title Insurance
Can You Shop?
Yes! Title insurance rates aren’t always fixed and you have the right to choose your title company.
How to Save
Shop around: Get quotes from 2-3 title companies
Ask about discounts:
- Reissue rate
- Simultaneous issue (both policies at once)
- Builder rate (new construction)
Negotiate: Prices are sometimes negotiable, especially on service fees
Check lender requirements: Some lenders have approved title company lists
What to Compare
| Factor | Questions to Ask |
|---|---|
| Premium | What’s the total premium for each policy? |
| Fees | What additional fees are charged? |
| Discounts | Are reissue or simultaneous issue discounts available? |
| Coverage | What’s covered? What’s excluded? |
| Reputation | What’s the company’s claims history? |
State-by-State Differences
Rate Regulation
Regulated states: Rates set by state (TX, FL, NM and others)
Competitive states: Rates vary by company
File and use states: Companies file rates with state but set their own
Who Customarily Pays
| Region | Who Typically Pays Owner’s Policy |
|---|---|
| Northeast | Seller |
| Southeast | Varies |
| Midwest | Seller |
| Southwest | Varies |
| West Coast | Varies by county |
Check local custom, but negotiate—everything is negotiable.
Frequently Asked Questions
Is title insurance required?
Lender’s title insurance is required by virtually all mortgage lenders. Owner’s title insurance is optional but highly recommended.
How long does title insurance last?
Lender’s policy: Until the loan is paid off Owner’s policy: As long as you or your heirs own the property
Why is title insurance so expensive?
It’s actually a one-time cost that provides coverage for decades. Unlike other insurance with annual premiums, title insurance is paid once and covers you indefinitely.
Can I choose my own title company?
Yes. While lenders may recommend companies, you generally have the right to choose your own. Shopping can save money.
What’s the difference between title search and title insurance?
The title search looks for problems. Title insurance protects you if problems are missed or arise later.
Do I need title insurance for a cash purchase?
No lender’s policy is needed (no lender). But owner’s title insurance is still strongly recommended to protect your investment.
What if the title company finds a problem?
Minor issues are usually resolved before closing. Major issues may delay closing, require negotiation or kill the deal. It’s better to find problems before you own the property.
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David Thompson
Former Bank Underwriter, 20+ Years in Lending
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