Quick answer

Title insurance shifts the financial risk of preexisting title problems from the buyer or lender to an insurer. Lenders almost always require a lender’s policy; owners can buy an owner’s policy for long-term protection.

Types of title insurance

  • Owner’s policy: Protects the buyer’s equity and legal ownership interest. It lasts as long as the owner (or their heirs) has an interest in the property.
  • Lender’s (mortgagee) policy: Protects the mortgage lender’s lien position for the amount of the loan; coverage ends when the loan is paid off.
  • Endorsements: Optional add-ons that expand coverage (e.g., for surveys, zoning, or condominium status).

What title insurance covers (and what it typically excludes)

Typical coverages:

  • Unknown liens or mortgages recorded against the property (including unpaid taxes or contractor liens).
  • Defective or forged deeds, improper signatures, or clerical errors in public records.
  • Undisclosed heirs or prior ownership claims, and fraudulent transfers.

Common exclusions:

  • Title problems created after the policy date (e.g., a future lien).
  • Zoning and land-use restrictions unless specifically endorsed.
  • Defects the buyer knew about and accepted at closing.

(Authoritative overview: Consumer Financial Protection Bureau – CFPB; U.S. Department of Housing and Urban Development – HUD.)

Typical costs and who pays

  • One-time premium at closing. National typical ranges (2024–2025 market snapshot):
  • Owner’s policy: roughly $400 to $3,500 (varies by purchase price and state).
  • Lender’s policy: roughly $150 to $1,500 (based on loan amount and state).
  • Many states regulate rates or use filed-rate schedules; others let insurers compete. Because of this variation, costs can differ substantially by state and county.
  • Who pays: custom and law vary by state and local practice. In many states the seller pays the owner’s policy; in others the buyer pays. Lender’s policy is commonly paid by the borrower. Always check your closing disclosure and local custom.

Sources: CFPB, HUD, American Land Title Association (ALTA).

How a claim works

  1. The title company performs a title search and issues a policy listing exceptions.
  2. If a covered defect later surfaces (e.g., an old tax lien), you file a claim with the insurer.
  3. The insurer will investigate, clear the defect if possible, or pay covered losses up to policy limits.

For more on how claims trigger coverage, see FinHelp’s guide on the Title Insurance Claims Process.

Real-world context and professional insight

In my work advising homebuyers, I’ve seen title issues delay closings for weeks — and once, a hidden contractor lien required insurer-curative work to clear the title before funding. Buying an owner’s policy is often low-cost compared with the potential legal and remediation bills it avoids.

Practical tips

  • Shop and compare title companies and ask for a bundled closing estimate; prices and services can vary.
  • Review the title commitment closely — pay attention to listed exceptions and any requirements to clear defects before closing.
  • Consider endorsements for specific concerns (e.g., survey-related coverage, condo conversion issues).
  • Ask whether your policy is “reissue-rate” eligible — some insurers give lower rates on refinances or when the title company previously issued a policy.

Also see FinHelp articles on Who Pays for Title Insurance? and Why Lenders Require Title Insurance and How It Protects Your Mortgage for deeper local-practice context.

Common mistakes

  • Assuming homeowner’s insurance covers title defects — it does not. Title insurance is separate from hazard or liability policies.
  • Skipping an owner’s policy because a lender requires only the lender’s policy. The lender’s policy protects the lender, not your equity.
  • Ignoring exceptions listed in the title commitment; unaddressed exceptions become part of the recorded title history.

Short FAQs

  • Is title insurance mandatory? Lenders usually require a lender’s policy for mortgages; owner’s policies are optional but strongly recommended.
  • How long does coverage last? Owner’s policies generally last as long as you or your heirs own the property. Lender policies last until the mortgage is paid.

Professional disclaimer

This content is educational and not legal advice. For advice about a specific property or state law, consult a qualified real estate attorney or your title agent. Authoritative sources include the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Housing and Urban Development (HUD).