Title insurance : What it is & do you need it ?

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You may not be required by your lender to buy title insurance, unlike home insurance, but if you don’t get it, you may regret it. Another consideration you may need to opt for is title insurance.

What is title insurance, and why is it important? Keep reading, we’ve got you covered.

Key Takeaways

Title insurance pays for financial damage that could come up if somebody disputes who actually should have possession to the title of your home.
Homeowners are sometimes not required to buy title insurance, but it’s a risky proposition to not get it. Meanwhile, your lender will always have it.
To get the best price, homebuyers should ask for different quotes from title companies.

What is title insurance and why do you need it?

Title insurance is a type of insurance policy that protects home buyers and lenders from financial loss if there is a dispute about the title of a property.

Your lender might recommend a title insurance company, but you should do some research of your own. After all, title insurance can cost between $500 and $3,500, depending on your state, the cost of your home and what insurance provider you pick.

Comparison shopping can shave down that price. There are also different types of title insurance, and you’ll want to make sure that you’re fully covered and not just the lender.

Even if you aren’t required to have title insurance — though you likely will be — the lender will have title insurance.

What does title insurance cover?

Title insurance covers any underlying issues with the home or property that the title company may have missed during the home-buying process, explains John W. Mallett, President, MainStreet Mortgage. Here’s what title insurance typically covers:

Ownership disputes: Title insurance can protect against claims disputing ownership rights, such as undisclosed heirs, forged documents, or errors in public records.

Liens: It covers unknown liens on the property, including unpaid taxes, mortgages, or other debts that may affect the ownership.

Fraud and forgery: Title insurance can provide coverage if someone fraudulently represents themselves as the property owner.

Survey and boundary issues: It covers survey discrepancies, boundary disputes, or illegal structures encroaching on the property.

Invalid Deeds and Documents: If there are issues with the validity of deeds, contracts, or other legal documents related to the property, title insurance can provide coverage.

Title insurance is valuable when the title company’s public record search fails to find any hidden issues like liens or ownership disputes.

Types of title insurance

That’s right. There are different types of title insurance. Below is a quick rundown.

Basic lender’s title insurance policy

This is the title insurance your lender gets. Lender’s title insurance will most likely be a required as a part of the mortgage.

If there’s something like a mechanic lien pops up, or unrecorded easements and access rights – your lender will be protected. However, you will not be.

Typically, your lender has a title company they use and will secure the lender’s title insurance policy themselves. However, since you’re the one footing the bill, you can shop around if you’d prefer a different insurer.

Basic owner’s title insurance policy

Owner’s title insurance protects you, the homeowner. If an issue arises that wasn’t covered during a title search, and you suddenly need to hire an attorney to defend your home, owner’s title insurance will help you pay for that.

This type of title insurance is not a standard part of most mortgages. The lender will require coverage that protects them, but they will leave it up to you whether or not you get title insurance that protects you.

Extended owner’s title insurance policy

Sometimes, it’s called an enhanced owner’s title insurance policy. As Mallett said, the odds of something going wrong are really slim, but it can happen, especially the older your house is and the more property you have. Maybe a previous owner made some home improvements that break some zoning code, or, as noted, you could learn a favorite part of your property isn’t yours.

Some really out there things could happen. You get some unpaid tax bills on your property – it should have been paid long before you moved in by the previous owner, but you’re being told to pay up. Extended owner’s title insurance would pay for that.

Some of the random issues that could crop up that extended owner’s title insurance covers include:

Building-permit violations
Subdivision maps
Covenant violations
Living trusts
Structure damage from mineral extractions
Encroachments and forgeries after title insurance is issued

So if something goes wrong with your title, and it leads to you needing to go to court or spending a small fortune to make the problem go away, title insurance can be a lifesaver.

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How much does title insurance cost?

According to the National Association of Realtors, the average cost of title insurance is around $1,000 per policy.

But, of course, the amount depends on the state — each state regulates title insurance differently — and it depends on the price of your home. You may pay much less – or considerably more.

According to the American Land Title Association, you can expect to pay around half a percent of the purchase price of the property for title insurance.

What insurance companies offer title insurance?

There are many title companies. Some of the biggest names are:

Fidelity National Title Insurance Company
Chicago Title Insurance Company
First American Title Insurance Company
Old Republic National Title Insurance Company
Attorney’s Title Insurance Funds, Inc.

If you’re stuck on who to turn to, Mallett suggests talking to your real estate professional or bank and asking for a recommendation.

When you pay for title insurance, though, you aren’t just paying money to insure you down the road. You are getting something out of it now. Before you buy title insurance, a title company is working to make sure there are no issues with your title.

“If you get a good title company, they will fix those issues for you,” Mallett says.

Once the title company determines everything is fine, they insure your home with title insurance. In the unlikely event that the title company didn’t actually catch everything, and then something goes wrong, then your title insurance will protect you.

How to buy title insurance

Buying title insurance is a pretty straightforward process.

Ask your real estate agent, lender or friends for recommendations for a title insurance company and research the insurer.
Compare quotes from several insurers. You could try the American Land Title Association website, which has a search engine of title insurance companies.
If you want to go the extra mile, the Consumer Financial Protection Bureau suggests asking for references from recent customers.
Once you’ve made a decision, based on the lender’s reputation and price, choose your title company and contact your lender.

How to save money on title insurance

Your best bet is to comparison shop. You’ll also want to consider if the title company has a good reputation.

Once you feel you have found the title company for you, you won’t be able to negotiate much, if at all, especially if your state has strict rules about title insurers, but sometimes, you can negotiate some of the extra fees that may be tacked onto the bill. Even in this digital world, there may be some copying charges, for instance, that you can knock off the price.

You also can ask your title company if they can give you the “simultaneous issue rate.” A simultaneous issue rate may be granted if your lender requires a lender’s title insurance policy — which you will have to pay for — and you are buying a basic or extended owner’s title insurance policy — which protects you— and you pay for them both at once.

Title concerns for new home construction

Even if you’re buying a totally new home, you should get title insurance.

Even though the house may be new, the property is not. Somebody – probably many somebodies – owned your land before your house. As unlikely as it seems, problems can still crop up where the question of who owns your land comes up.

Mallett asserts. “The most important asset you have is probably going to be your home, and not to have title insurance protecting that is just a big mistake,” he says. “That’s why lenders won’t do a loan without it.”

Frequently asked questions

How long does title insurance coverage last?

Owner’s title insurance lasts for as long as you own the property unless you choose to terminate the policy sooner. A lender policy lasts only for as long as the loan remains unpaid. For example, if you take a 30-year mortgage on the property and keep it until the end of the term, the lender policy will expire at that time.

Is title insurance coverage worth it?

Title insurance policies serve as a protective shield against potential future property ownership disputes, safeguarding you from costly lawsuits.

Can you buy title insurance after closing?

You are generally required to purchase lender’s title insurance at the time of the mortgage agreement but you can buy an owner’s title insurance policy at any time after the closing of the property purchase.

Shivani Gite

Contributing Writer

Shivani Gite is a personal finance and insurance writer with a degree in journalism and mass communication. She is passionate about making insurance topics easy to understand for people and helping them make better financial decisions.

On this page

What is title insurance and why do you need it?
What does title insurance cover?
Types of title insurance
How much does title insurance cost?
What insurance companies offer title insurance?
How to buy title insurance
How to save money on title insurance
Title concerns for new home construction
Frequently asked questions

The basics of title insurance

What is title insurance and why do you need it?

What does title insurance cover?