Title insurance protects against defects in a property's title — prior claims, liens, or ownership disputes that could threaten your ownership rights. Here is what you need to know.
What Is Title Insurance?
Title insurance protects against losses arising from defects in a property's title — past events that could threaten your ownership or the lender's security interest. Unlike most insurance that protects against future events, title insurance protects against past events that weren't discovered during the title search.
Two Types of Title Insurance
- Lender's title insurance: Required by virtually all mortgage lenders. Protects the lender up to the loan amount. You pay for it; the lender benefits. Cost: typically 0.5–1% of the loan amount.
- Owner's title insurance: Optional but highly recommended. Protects you (the buyer) for as long as you own the property. One-time premium. Cost: similar to lender's policy.
What Title Insurance Covers
- Outstanding liens from prior owners (unpaid taxes, contractor liens, HOA arrears)
- Errors or omissions in prior deeds
- Undisclosed heirs who claim ownership
- Forgery or fraud in the chain of title
- Boundary or survey disputes
- Recording errors
What It Doesn't Cover
- Defects arising after the policy date
- Issues you knew about at closing
- Zoning violations or permit issues (unless specifically endorsed)
- Environmental hazards
Title Insurance Costs
On a $350,000 purchase with a $315,000 loan: Lender's policy ~$1,000–$1,800. Owner's policy ~$800–$1,500. Bundled rate: typically $1,500–$2,500 total for both. In most states, you can shop title companies (a RESPA-protected right) — the HUD-1/Closing Disclosure lists it as a Section C service you can shop.
Reissue Rates
If you're refinancing and use the same title company as your original purchase, ask about the reissue rate — typically 40–60% off the standard premium, representing major savings.
Frequently Asked Questions
Yes — owner's title insurance is almost always worth the one-time premium. Title defects are rare but can be catastrophic and expensive to resolve when they occur. For $800–$1,500 at closing, you get permanent protection against unknown prior claims on the property. It's especially valuable if the property has a complex ownership history, was inherited, went through foreclosure, or has had multiple owners.
Yes — under RESPA, you have the right to choose your own title company for the owner's policy and related settlement services. Your lender may have an affiliated title company they recommend, but they cannot require you to use it for owner's policy. Prices vary by company, so shopping can save $200–$500.