What Is Title Insurance?
Title insurance is a unique type of protection in real estate transactions. It shields homeowners and lenders from potential legal or financial issues related to a property’s title—essentially, its legal ownership.
Unlike other types of insurance that cover future events, title insurance protects against past problems that may not show up during the sale. These issues could include public record errors, unpaid taxes, existing liens, or ownership claims from unknown heirs.
Why Title Insurance Matters
When you buy a home, you’re not just getting the property—you’re also taking on its legal history. Without title insurance, a hidden issue could put your ownership at risk or cost you thousands in legal expenses.
Example: Imagine buying a home and later discovering a contractor placed a lien for unpaid work done under the previous owner. Title insurance could cover the cost of resolving that issue, so you don’t have to.
Types of Title Insurance
There are two main types of title insurance policies:
There are two primary types of title insurance:
- Lender’s Title Insurance
This policy protects the lender, not the buyer. It’s almost always required by mortgage providers and remains in effect as long as the mortgage exists. - Owner’s Title Insurance
This optional policy protects you, the buyer, from title-related issues. It’s a one-time cost that lasts for as long as you (or your heirs) own the property.
Recommendation: While it’s optional, we strongly recommend owner’s title insurance for peace of mind and long-term protection.
What Does Title Insurance Cover?
Title insurance can help cover legal costs, settlements, or financial losses related to the following:
- Undisclosed liens or judgments: For example, a previous owner failed to pay a contractor, and a lien was filed.
- Errors in public records: Filing or clerical mistakes that misrepresent ownership history.
- Forged deeds or impersonation: Someone fraudulently sold the property with a forged signature or false identity.
- Boundary disputes: Conflicts over where property lines begin or end.
- Claims from unknown heirs: An heir of a past owner claims the home was sold improperly.
- Improperly recorded documents: Misfiled legal records that lead to confusion about ownership.
- Fraudulent transactions: The property was sold without proper authority or documentation.
How Much Does Title Insurance Cost?
Title insurance is typically paid as a one-time premium at closing. Costs vary by state and are based on the home’s purchase price and loan amount. On average:
- Lender’s Policy: 0.5% to 1% based on the property location and loan amount
- Owner’s Policy: 0.42% to 1% based on the property location and the home’s purchase price
In some cases, you may qualify for a reissue rate discount if the property was recently insured.
Who Pays for Title Insurance?
Responsibility for paying title insurance varies by state and even by county. In many cases:
- The buyer pays for the lender’s title insurance.
- The seller or buyer may pay for the owner’s policy, depending on local customs.
Check with your lender or real estate agent to understand how it works in your area.
Title Insurance vs. Other Types of Insurance
| Feature | Title Insurance | Homeowners Insurance | Mortgage Insurance |
|---|---|---|---|
| Protects Against | Past issues with ownership/title | Future damage to property | Loan default risk to lender |
| Who It Protects | Buyer and lender | Homeowner | Lender |
| When It’s Paid | One-time fee at closing | Monthly or annual premiums | Monthly premiums (if required) |
| Duration | As long as you own the home | As long as policy is active | Until loan balance reaches required threshold |
Frequently Asked Questions (FAQ)
Q: Is title insurance required?
A: Lender’s title insurance is almost always required if you’re getting a mortgage. Owner’s title insurance is optional but highly recommended to protect your investment.
Q: Can I buy title insurance after closing?
A: No. Title insurance must be purchased at the time of closing. It cannot be added retroactively.
Q: Does title insurance cover future claims?
A: No. It covers unknown past issues related to the property’s title, not new problems that arise after closing.
Q: How long does title insurance last?
A: The lender’s policy lasts as long as the mortgage. The owner’s policy remains in effect as long as you (or your heirs) own the home.
Q: Can I shop around for title insurance?
A: In many states, yes. You can choose your title insurance provider, though some lenders may recommend or work with specific companies.
Q: What happens if there’s a title claim after I buy the house?
A: If the issue is covered by your policy, the title insurance company will typically pay legal fees or cover financial losses related to the claim.
Final Thoughts
Title insurance is a key part of making a secure home purchase. It protects your investment from hidden claims and gives you confidence in your ownership. At Revix, we encourage all homebuyers to invest in owner’s title insurance to ensure long-term peace of mind.
Have questions about how title insurance fits into your closing costs—or what coverage you need? We’re here to help every step of the way.
