What Is Title Insurance?
Title insurance protects a buyer and lender against financial loss from title defects - such as undisclosed liens, forged documents or ownership disputes - that a title search may not catch. The lender's policy is usually required with a mortgage; the owner's policy, which protects the buyer, is optional.
Title Insurance in plain English
Before closing, a title company searches public records to confirm the seller can transfer clear ownership. Title insurance covers losses from problems the search missed, such as a forged signature in the chain of ownership or an old unpaid lien.
There are two policies. The lender's policy protects the lender and is usually required with a mortgage; the owner's policy protects you and is optional.
Why it matters
Without an owner's policy, a claim against the title from before your purchase could leave you paying legal costs or losing equity. Buying both policies from the same company is usually cheaper than buying them separately.
What it means for you
Who pays?
Set by local custom and the contract.
When is it paid?
At closing.
Common mistakes
- Assuming the lender's policy protects you as the owner.
- Not shopping title services when the Loan Estimate says you can.
- Ignoring exceptions listed in the title commitment.
Title Insurance: frequently asked questions
Do I need owner's title insurance?
It is optional, but it is the only policy that protects you. The lender's policy covers only the lender's loan.
Who pays for title insurance?
It depends on local custom and the contract. In some areas the seller pays for the owner's policy; in others the buyer does.
Can I choose my title company?
Often, yes. Your Loan Estimate shows which services you can shop for; a seller generally cannot require you to use a particular title insurer.
Related Terms
Where it fits
- Buying a home, Title: before this, Title Search; next, Chain of Title.
More Buying Terms
Recommended next step
Include title charges in your closing-cost estimate.
Closing cost calculator →Sources and review
- What is owner's title insurance?, Consumer Financial Protection Bureau. Supports: Owner's title insurance protects the homeowner against claims from before the purchase and is optional; lenders require a lender's policy.
Where this applies: United States. Title insurance is regulated by states; who customarily pays varies by area.
Last reviewed: · Updated:
Examples use illustrative figures; rules of thumb are labelled as such. Rates, limits and program rules change - confirm current figures with your lender or a qualified professional.
This definition is provided for general educational purposes and is not financial, legal, tax, or real estate advice. Verify important decisions with appropriately qualified professionals.
Understand a property's costs and risks before you make an offer
Use the free calculator for your own numbers, or analyze a specific home before you commit.
Or analyze a specific property: Essential Property Analysis, $19 · Property Decision Analysis, $49 · Professional Property Analysis, $99. You choose the depth before you pay.