Title Insurance Explained
Title insurance protects you against financial losses from defects in a property's title — issues that existed before you bought the home, such as undisclosed liens, forged deeds, or ownership disputes. Unlike other insurance, you pay a single one-time premium at closing.
Owner's Policy vs Lender's Policy
🏠 Owner's Title Policy
- ✓ Protects the buyer / property owner
- ✓ Covers the full purchase price
- ✓ One-time premium, lasts forever
- ✓ Covers pre-existing title defects
- ✓ Pays legal defense costs
- Optional (but highly recommended)
🏦 Lender's Title Policy
- ✓ Protects the mortgage lender
- ✓ Covers the loan amount (not equity)
- ✓ Required by virtually all lenders
- ✓ Does not protect the buyer
- ✓ Expires when the loan is paid off
- Required for financed purchases
What Title Insurance Covers
Unknown Liens
Unpaid contractor bills, tax liens, or HOA dues the previous owner left behind.
Forged or Invalid Deeds
Prior transfers of ownership that were forged, fraudulent, or executed by someone without legal authority.
Undisclosed Heirs
A deceased previous owner's heir who wasn't included in the estate and later claims ownership.
Survey & Boundary Errors
Encroachments or easements that weren't properly recorded in prior deeds.
Legal Defense Costs
Attorney fees and court costs if your title is challenged — even if the claim ultimately fails.
Recording Errors
Clerical mistakes in public records that affect your ownership rights.
How Much Does Title Insurance Cost?
Title insurance is a one-time premium paid at closing. Cost varies by state and purchase price — typically between $500 and $3,500. Some states (like Texas and Florida) have state-regulated rates; others allow competition between title companies.
💡 Quick rule of thumb
Budget roughly 0.5% – 1% of the purchase price for title insurance. On a $400,000 home, expect to pay $800 – $2,000 total (owner's + lender's policies combined).
Who Pays for Title Insurance?
This varies by state and local custom. In some states the seller pays; in others the buyer pays; in many it's negotiable. In Texas, the seller almost always pays for the owner's policy. In New York, the buyer typically pays. Always check your state's customs and negotiate in the purchase agreement.
See who pays by state →Do FSBO Sellers Need Title Insurance?
As a seller, your biggest protection comes from having ordered a title search before listing. The buyer (and their lender) typically require title insurance to close. As a FSBO seller, you can order a preliminary title report early to identify and resolve any issues before they derail the deal.
The lender's policy is almost always required when the buyer is financing. The owner's policy is technically optional but protects the buyer's equity against future claims.
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