Title Insurance
Protects against losses from defects in property titles during real estate transactions.
Typical cost: $500 – $3,500 (one-time)
What Is Title Insurance?
Title insurance protects property owners and mortgage lenders from financial loss due to defects in a property's title. Before issuing a policy, a title company searches public records for liens, encumbrances, and ownership issues. The insurance then protects against problems the search might have missed.
Owner's vs. Lender's Policies
Lender's title insurance is required by mortgage companies and only protects the lender's interest. Owner's title insurance protects your equity and is optional but highly recommended. Both are one-time premiums paid at closing that protect you for as long as you own the property.
What Can Go Wrong
Title defects include forged documents, unknown heirs claiming ownership, recording errors, undisclosed liens, boundary disputes, and fraud. Without title insurance, you could be financially responsible for resolving these issues—or even lose your property.
What's covered
Ownership Defense
Covers legal costs to defend your ownership against claims from third parties.
Lien Protection
Protects against undiscovered liens from unpaid taxes, contractors, or judgments.
Forgery Coverage
Covers losses if previous deed transfers involved forged signatures.
Recording Errors
Protects against mistakes in public records that affect your title.
Boundary Issues
Covers disputes over property boundaries and encroachments.
Unknown Heirs
Protects if a previously unknown heir claims ownership of the property.
Pros and cons
Advantages
- One-time premium provides lifetime protection
- Protects your largest financial investment
- Covers legal fees to defend your ownership
- Required by lenders, ensuring professional title search
- Protects against issues a title search could miss
- Transfers with the property until you sell
Considerations
- One-time cost can be $1,000-$3,000 or more at closing
- Owner's policy is optional and adds to closing costs
- Does not cover issues arising after policy date
- Known defects disclosed before closing are excluded
- Coverage amount limited to purchase price or loan amount
Frequently asked questions
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