Understanding Home Title Insurance: What You Need to Know

What home title insurance covers

Title insurance protects against past problems with a property's ownership history, not future events. A title search can miss things — a clerical error in public records, a forged signature decades back, an heir nobody disclosed. If one of those surfaces after you close, title insurance covers the legal defense and any financial loss, up to the policy limit.

Owner's policy vs. lender's policy

• Owner's title insurance protects the buyer's equity in the property. It's optional, but it's the only policy that protects you directly — the lender's policy doesn't.
• Lender's title insurance protects the lender's interest until the mortgage is paid off, and is required by almost every mortgage lender. It's usually sized to the loan amount, not the purchase price.

Some insurers also offer enhanced policies, which add coverage for things like post-policy forgery, permit violations, and encroachments — broader protection for a higher premium.

How the process works

Before a policy is issued, the title company runs a title search of public records to check for liens, unpaid taxes, easements, or competing ownership claims. Any issues found have to be cleared — a lien paid off, a release obtained — before the policy can be issued and the sale can close. See what a title company does for the full closing process.

Common title issues

• Unpaid property taxes from a previous owner, which show up as a lien on the property.
• Liens from unpaid contractors, mortgages, or court judgments.
• Easements that give a utility or neighbor rights to use part of the property.
• Boundary disputes from inaccurate surveys or descriptions.
• Undisclosed heirs who later claim an ownership interest.

What it costs

Owner's title insurance typically runs 0.5%–1% of the purchase price; lender's title insurance runs 0.25%–0.5% of the loan amount. Both are paid once, at closing. Rates are regulated in many states, so the premium itself may be similar across providers — settlement and add-on fees are where it pays to compare. See our full title company cost breakdown.

Choosing a provider

Look at reputation, the range of services offered (search, exam, escrow under one roof is more convenient), pricing, and responsiveness. You can pick your own provider rather than defaulting to whoever your agent or lender suggests — compare title companies by state and city to see local options.