What Is Title Insurance?

Title insurance is a one-time policy you purchase at closing that protects against financial loss if someone challenges your legal ownership of the property. Unlike other insurance that covers future events, title insurance covers issues that already exist—such as undisclosed liens, forged documents, or recording errors—but were not discovered during the title search.

There are two types: a lender’s policy (required by virtually all mortgage lenders) and an owner’s policy (optional but highly recommended). A lender’s policy typically costs $500–$1,500, while an owner’s policy runs $1,000–$3,500 depending on your home’s purchase price and state. On a $400,000 home, you might pay around $2,000 total for both policies combined.

Key Facts

• Lender’s policy: Required by nearly all mortgage lenders; protects the lender’s interest
• Owner’s policy: Optional; protects your equity and legal ownership rights
• One-time cost: Paid once at closing, no recurring premiums
• Typical cost: $1,000–$3,500 for both policies, varying by state and purchase price
• Coverage period: Lender’s policy lasts until the loan is paid off; owner’s policy lasts as long as you or your heirs own the home

Frequently Asked Questions

Do I need both a lender’s and owner’s title insurance policy?

Your lender will require a lender’s policy, but the owner’s policy is optional. However, without an owner’s policy you are personally responsible for legal costs and losses if a title defect arises. Most real estate attorneys and the CFPB recommend purchasing both.

What does title insurance actually cover?

Title insurance covers defects that existed before you purchased the property, including unknown liens, forgery, recording mistakes, undisclosed heirs, and boundary disputes. It pays legal defense costs and covers financial loss up to the policy amount.

Can I shop around for title insurance?

Yes. Under RESPA, you have the right to choose your own title insurance company. Rates vary by provider and state, so comparing quotes can save you several hundred dollars at closing.