What Is Title Insurance and Why Do I Need It?
Understanding What Exactly Is Title Insurance?
What Is Title Insurance?
Title insurance is a special type of insurance that protects property buyers and lenders from problems with the title—or legal ownership—of a home. A “title” is the official record of who owns a piece of property. Before a home sale closes, a title company will do a title search, which checks public records to make sure the title is free of any legal issues, like liens, unpaid taxes, or ownership disputes.
However, sometimes things slip through the cracks—even with the most thorough title search. That’s where title insurance comes in. It provides financial protection in case someone else claims they own your property or if there's a mistake in the public records. In short, it helps make sure the home you’re buying is really yours—and stays that way.
Types of Title Insurance
There are two main types of title insurance, and each one serves a different purpose in the home buying process:
- Owner’s Title Insurance
This policy protects you, the buyer. It covers legal fees and losses if someone challenges your ownership or if a previously unknown issue with the title comes up—like a long-lost heir or an old unpaid lien. It’s optional but highly recommended, especially if you’re making a large investment. - Lender’s Title Insurance
This policy protects the lender (your mortgage company). Most lenders require this policy before they’ll fund your loan. It ensures that they have a legal claim to the property if you default on your mortgage. This type of policy doesn’t protect you—it only protects the lender’s interest.
Why You Need Title Insurance
You might be asking, “Is this really necessary? I’m buying this home in good faith.” The truth is, title problems are more common than you think, and they can be financially devastating. Here’s why title insurance is such a critical part of the homebuying process:
1. Undiscovered Issues Can Pop Up Later
Even the most thorough title search might miss something. Issues like forged documents, clerical errors, or unpaid property taxes from previous owners can surface after you’ve closed on the home.
2. Ownership Disputes
If someone claims they are the rightful owner of your home—even years after you buy it—your title insurance can cover your legal fees and any potential settlement.
3. Peace of Mind
Buying a home is one of the biggest financial decisions you’ll ever make. Title insurance gives you peace of mind, knowing your rights to the property are secure.
What Does Title Insurance Cover?
While coverage can vary slightly depending on the policy, here’s a general list of what most owner’s title insurance policies protect against:
- Unknown heirs of previous owners
- Forged deeds or fraudulent transfers
- Mistakes in public records
- Liens from unpaid contractor work or bills
- Legal description errors
- Unreleased mortgages
- Encroachments or boundary disputes
Special Pricing Note!
Title insurance is a one-time fee you pay at closing. Unlike other types of insurance, there are no ongoing premiums.
How Much Does Title Insurance Cost?
The cost of title insurance varies by location and the value of your home. On average, you can expect:
- Owner’s Title Insurance: $500 – $1,500 (one-time fee)
- Lender’s Title Insurance: Usually a little less, but also based on the loan amount
These prices can be higher or lower depending on your state, the price of the property, and the title company you choose. In some states, prices are regulated. In others, you can shop around.
Pro Tip!
You’re allowed to choose your title company in most cases. I always recommend comparing rates and services—but I can also point you toward trusted providers I’ve worked with.
When Do You Get Title Insurance?
Title insurance is purchased at closing, as part of your final closing costs. The title company or your closing attorney will walk you through the paperwork, explain the coverage, and collect payment. The good news? You pay for it once, and you're protected for as long as you own the home.
Who Pays for Title Insurance?
The answer depends on your location and local customs. In some states, the buyer pays for owner’s title insurance. In others, it’s the seller. Sometimes the cost is split. The lender’s policy is almost always paid for by the buyer since it’s a loan requirement.
If you're unsure who pays in your area, don’t worry—I’ll explain everything during your loan process so there are no surprises.
Can You Buy a Home Without Title Insurance?
Technically, yes. But only the owner’s policy is optional—your lender will almost always require a lender’s title policy. While it might be tempting to skip the owner’s policy to save money, doing so can be risky.
Imagine buying a home and then getting sued because someone else says they own it. Without title insurance, you’d be on the hook for your legal defense—and potentially losing your home altogether.
What Happens If a Problem Comes Up Later?
If a title issue arises after you've closed and you have title insurance, here's what typically happens:
- You file a claim with your title insurance company.
- The company investigates the issue.
- If the claim is valid, they’ll cover your legal costs or reimburse your financial loss, depending on your policy.
It’s a safety net you hope to never use—but one that could save your home or your savings.
Why Work with Sally Bernard When Buying a Home
When you're buying a home, you want someone in your corner who knows how to guide you through the fine print—and that includes understanding title insurance. I’m Sally Bernard, and as a mortgage loan officer with years of experience, I don’t just focus on getting you approved. I help you protect what you’re investing in.
From recommending reliable title companies to explaining your closing costs and insurance options, I make sure you’re informed, confident, and protected every step of the way. Your home should be a source of comfort—not confusion. Let's make it happen, together.
Contact Sally Bernard
