Opening paragraph
Title insurance is a closing-stage safeguard that reduces the risk that prior problems with a property’s ownership history will surprise a new owner or the lender after paperwork has been signed. Unlike hazard insurance or mortgage insurance, which protect against future events, title insurance defends against covered claims tied to events that occurred before you bought the home. For lenders, a policy is typically required; for buyers, an owner’s policy is optional but often worth the cost.

How title insurance fits into a mortgage closing

  • Title search and exam: A title company or attorney performs a title search, examining public records for liens, judgments, easements, probate issues, and other encumbrances. The search helps the lender determine whether the property has a “marketable” title. (See CFPB guidance on closing costs and searches.)
  • Title commitment: The title company issues a title commitment (or binder) listing exceptions and conditions that must be cleared before closing. Any outstanding liens or defects usually must be resolved as a condition of the lender issuing funds.
  • Closing and premium payment: Title insurance is typically purchased at closing via a one-time premium. The lender receives a lender’s policy; buyers can purchase an owner’s policy to protect their equity.

What title insurance actually covers
A standard title insurance policy generally covers losses from covered risks such as:

  • Recorded liens and judgments that were missed or recorded improperly.
  • Forged or undisclosed deeds, mortgages, or releases.
  • Errors or omissions in public records, including incorrect legal descriptions.
  • Undiscovered heirs or claims from relatives of prior owners.
  • Certain encroachments or boundary disputes (coverage can be limited).

Policy exclusions and limitations
Title policies exclude known matters listed as exceptions on the commitment (for example, recorded easements or covenants). They typically do not cover:

  • Zoning, environmental, or building-code violations.
  • Matters that arise after the policy date (owner’s policies only cover past defects unless additional endorsements are bought).
  • Contractual disputes not reflected in public records.
    Always read the Schedule B exceptions and endorsements carefully so you know what is and isn’t covered.

Lender’s policy vs. owner’s policy — what’s the difference?

  • Lender’s title insurance: Protects only the lender’s lien position and remains in force until the mortgage is paid or refinanced. Lenders usually require this when they make the loan.
  • Owner’s title insurance: Protects the homeowner’s equity and right to possession. An owner’s policy is usually a one-time purchase at closing and remains effective while you or your heirs hold title.
    In my practice I’ve seen buyers decline the owner’s policy to save a few hundred dollars, only to pay thousands later when an old lien or boundary dispute surfaces. An owner’s policy is insurance for the equity you build.

How much does title insurance cost in 2025?
Costs are state-regulated in many states and typically vary by purchase price or loan amount. Typical ranges for 2024–2025 are:

Policy type Typical cost (approx.)
Lender’s policy 0.3%–1.0% of loan amount (varies by state)
Owner’s policy 0.3%–1.0% of purchase price (often a similar range)

Some states use fixed-rate schedules rather than percentage-based fees. The premium is generally a one-time fee paid at closing; in some markets it can be negotiated or split between buyer and seller depending on local custom. (See ALTA for typical rate mechanics.)

Common title issues that can delay or block a closing
1) Outstanding tax or mechanic’s liens recorded against the property
2) Missing or incorrect deeds (e.g., improper marital status or misspelled names)
3) Unreleased mortgages or satisfied liens that weren’t recorded correctly
4) Probate issues or undisclosed heirs claiming ownership
5) Easements or restrictive covenants that affect intended use
When a title search finds one of these issues, a title curative process begins: the title company requests lien releases, pays off encumbrances from closing proceeds, or coordinates corrective documents. The lender will not fund until curative steps clear the title to their satisfaction.

How to shop for title insurance and what to ask

  • Compare estimates: Ask for a title insurance quote (often called a title rate) and a breakdown of search, exam, and closing fees. Use the closing disclosure to compare final costs.
  • Check the title company’s reputation: Look for reviews, complaints, and whether they work with local real estate attorneys.
  • Ask about endorsements: Common endorsements (for an extra fee) include ALTA 6 (survey coverage), ALTA 8.1 (access), or foreclosure-related endorsements.
  • Confirm who pays: Buyer/seller payment customs differ by state—some markets have sellers pay the owner’s policy as part of the sale negotiations.

Practical strategies I use with clients

  • Buy the owner’s policy if you plan to hold the home for several years. The one-time premium protects the equity you build.
  • Request a copy of the title commitment early; review Schedule B carefully and ask your attorney or title officer to explain exceptions.
  • If a prior issue appears, insist on written curative action before closing. Never accept vague assurances that a problem will be solved after the fact.

Title insurance and refinancing
When you refinance, lenders usually require a new lender’s policy; in many states you can pay a reduced “re-issue” rate if you have an existing owner’s policy. Check with your title company to see if a discount applies.

Real-world example
A client I worked with discovered—after moving in—that a judgment lien filed by a contractor against a previous owner had not been cleared. Because they purchased an owner’s policy at closing, the title company defended the claim and paid to remove the lien, protecting my client’s equity and saving them thousands in legal fees.

Frequently asked questions (brief)

  • Is title insurance required? Lenders typically require lender’s title insurance; owner’s title insurance is optional but recommended. (CFPB)
  • Will a title search find everything? No. A search focuses on recorded public records. Hidden defects (like forged documents) can still surface later; that’s what title insurance addresses.
  • Who pays for title insurance? Local custom and state law determine this—negotiate it as part of your purchase contract.

Key resources and authorities

Related FinHelp articles

Professional disclaimer
This article is educational and not a substitute for legal or financial advice. For transaction-specific guidance, consult a licensed real estate attorney or your lender. In my practice I also refer clients to local title counsel for complex curative work.

Final takeaway
Title insurance is a one-time cost that shifts the financial risk of past title defects from you (and your lender) to the insurer. For most buyers, especially those purchasing older or resale homes, an owner’s policy is worthwhile protection worth considering as part of your mortgage-closing checklist.