Title Protection
Real Estate Title Insurance Explained
Title insurance protects against losses from defects in a property's title that existed before the policy was issued. It's unique among insurance products — and a frequent exam topic.
How Title Insurance Differs from Other Insurance
Unlike homeowner's insurance or auto insurance, title insurance covers events that already happened before the policy was issued — not future events. It protects against undiscovered liens, forged deeds, undisclosed heirs, recording errors, and other title defects that could challenge ownership.
Title insurance is issued after a title search, which examines the chain of ownership back several decades. Even thorough title searches can miss defects hidden in public records, which is where the insurance fills the gap.
It's a one-time premium paid at closing. There are no annual renewals. The owner's policy remains in effect for as long as the owner (or their heirs) hold an interest in the property.
Two Types of Title Insurance
Owner's Policy
Protects the buyer's ownership interest. One-time premium, typically 0.5–1% of purchase price. Lasts as long as the insured owns the property.
Lender's Policy
Required by almost all mortgage lenders. Protects only the lender's interest up to the loan balance. Does not protect the buyer's equity.
Extended Coverage
ALTA extended policies cover additional risks not in standard policies — survey issues, unrecorded easements, and off-record matters. Common in commercial transactions.
Title Insurance FAQ
What does title insurance NOT cover?
Title insurance doesn't cover defects created after the policy date, zoning violations, environmental issues, and problems that would have been discovered by a physical inspection or accurate survey.
Who typically pays for title insurance?
This varies by state and is negotiable. In some markets, the seller traditionally pays for the owner's policy. In others, the buyer pays. The lender's policy is virtually always paid by the buyer.
What is a chain of title?
The chain of title is the history of all owners of a property from the original grant to the present. A broken chain — a gap in the record of conveyances — creates a title defect.
What is a title commitment or binder?
Before the final policy is issued, the title company issues a title commitment (also called a preliminary report or binder) showing the current state of title, existing encumbrances, and conditions that must be met before the policy is issued.