What is title insurance?

Title insurance protects against title search errors, undiscovered title defects, and losses that arise from disputes over property ownership once the property has been purchased.

What is a title search?

A title search is intended to provide a buyer with basic information about the real estate he or she wants to purchase. Among other things, the title search will ensure that no one other than the seller has any ownership interest in the property.

What is a title defect?

A title defect is any legal right to property that is claimed by a person other than the owner.

Why do I need title insurance?

If you use a mortgage loan to finance the purchase of a home or any other piece of propert, your mortgage lender will most likely require you to purchase a title insurance policy that insures them against title defects. This policy, called a lender's policy or a loan policy, protects only the mortgage lender's interest in the property. To protect your own interests in the property against loss due to unknown title defects, you will need to purchase an owner's policy.

How necessary is an owner's title insurance policy?

You are not legally required to purchase both a lender's policy and an owner's policy. However, there are several reasons why purchasing an owner's policy may make good sense. First of all, compared to the protection it offers, the cost of an owner's policy is minimal. For only a few hundred dollars, an owner's policy can spare you the time and expense of defending your property rights against claims brought by others and will reimburse you for losses caused by title defects up to the face amount of the policy. Secondly, even the most thorough title search cannot absolutely assure that no title defects are present. An owner's policy will protect and defend you against undiscovered title defects caused by, among other things:
  • Forged documents
  • Liens on the property for unpaid taxes
  • Negligence on the part of the original title examiner
  • Undisclosed or missing heirs who come forward to claim part of all of the property
  • Other unknown claims to the property that are not contained in any public record
The cost of an owner's policy is negligible, because the majority of the fee you will pay is for the balance due on your mortgage. Your owner's policy will cover the cost of any legal dispute with a neighbor - typically an Owner's Policy is only an extra $100 or so - that's a bare ½ hour of time if you are faced with litigation over your boundaries in the future. If purchased, an Expanded Owner's policy will guarantee that the insurance company will provide you with an attorney if you have a boundary dispute. Like all insurance, you may never need it, but we strongly recommend it because the cost is so low and the potential benefit so high.:
  • Are created, assumed, or agreed to by the insured
  • Are not known to the title insurer, not recorded in any public records, but are known to the insured and not disclosed to the title insurer
  • Do not result in any loss or damage to the insured
  • Arise subsequent to the date on which the insurance policy is issued
How much will I have to spend on title insurance?

How much you will spend on title insurance will depend on the type of policy you purchase. The cost of a lender's policy is typically based on the amount of the buyer's mortgage loan. On average, lender's policies cost between $800 and $1,000 - a one-time fee paid at closing. The cost of an owner's policy is typically based on the sales price of the property. On average, owner's policies cost between $450 and $600 - a one-time fee paid at closing. The First American Corporation has a title fee calculator you can use to help you estimate what you will pay for title insurance in your area.
If you'd like to schedule a free, no-obligation consultation in one of our offices you can call toll free at 888-336-1212
between 9:00 and 5:30 Monday through Friday, or click here to use our interactive calendar.