Title insurance protects property buyers and lenders from financial losses caused by defects in a property's ownership history. Unlike other insurance that protects against future events, title insurance protects against past events (unknown liens, ownership disputes, recording errors) that surface after closing.
61 steps across 12 sections
1. Records Examined
- Deed records: Every transfer of ownership from the original land patent/grant to present
- Mortgage and lien records: Outstanding mortgages, home equity loans, and other liens
- Tax records: Unpaid property taxes, special assessments
- Court records: Judgments, bankruptcies, divorces, probate proceedings
- Easement records: Rights-of-way, utility easements, access agreements
- HOA records: Assessments, covenants, conditions, and restrictions (CC&Rs)
- Survey records: Boundary descriptions, encroachments
2. How Long It Takes
- Standard title search: 1-2 weeks
- Complex histories or title issues: 2-6 weeks
- Title companies spend an average of 22-45 hours per transaction
3. Lender's Title Insurance (Loan Policy)
- Protects: The mortgage lender
- Required: Yes, by virtually all lenders as a condition of the loan
- Coverage amount: Equals the loan amount (decreases as loan is paid down)
- Duration: Until the mortgage is paid off or refinanced
- Cost: Included in closing costs (paid by buyer in most states)
4. Owner's Title Insurance
- Protects: The property buyer/owner
- Required: No, but strongly recommended
- Coverage amount: Equals the purchase price (remains constant)
- Duration: As long as you or your heirs own the property
- Cost: One-time premium paid at closing
- Key point: Lender's policy does NOT protect the buyer's equity — only the owner's policy does that
5. Enhanced Owner's Policy
- Additional coverage: Includes post-policy protections such as:
- Building permit violations by prior owners
- Encroachments discovered after purchase
- Certain boundary issues
- Cost: Approximately 10-20% more than standard owner's policy
6. Standard Coverage
- Defects in title found in public records
- Liens and encumbrances
- Errors in recording documents
- Forgery and fraud in the chain of title
- Undisclosed heirs or missing heirs
- Judgments and tax liens
7. What Title Insurance Does NOT Cover
- Known defects disclosed before purchase
- Government actions (eminent domain, zoning changes enacted after purchase)
- Environmental contamination
- Issues arising after the policy date
- Defects that the buyer created
- Native American claims on the land (in some policies)
- Boundary issues visible from a survey (unless enhanced policy)
8. Typical Pricing
- One-time premium paid at closing (no monthly or annual payments)
- Typically ranges from 0.5% to 1% of the purchase price
- On a $400,000 home: approximately $2,000-$4,000
9. Who Pays?
- Varies by state and local custom:
- Buyer pays in many states (Northeast, Midwest)
- Seller pays in some states (Florida, some Western states)
- Split between buyer and seller in others
- Always negotiable in the purchase agreement
10. Simultaneous Issue Discount
- When both lender's and owner's policies are issued at the same time, most title companies offer a significant discount on the second policy
- Ask about this discount — it can save $200-$500+
11. When to File
- You receive notice of a lien you did not know about
- Someone claims ownership of your property
- A boundary dispute arises
- A previously unknown easement is discovered
- A forgery or fraud in the chain of title is uncovered
12. How It Works
- Contact your title insurance company immediately
- Provide documentation of the claim
- The title company investigates and either:
- Defends your title in court at their expense
- Pays to resolve the claim (e.g., paying off an unknown lien)
- Compensates you for losses up to the policy amount
- There is no deductible on title insurance claims