Protecting Your Ownership.
Title insurance is one of the quieter parts of a real estate closing, but it can matter a great deal. It's a policy designed to protect your ownership rights, and often your lender's interest, against certain title-related problems. Here's a plain-English look at what it covers and where it fits in your closing.
What title insurance is
A one-time policy that guards against certain risks tied to a property's title.
"Title" is the legal term for your right to own and use a property. Title insurance is a policy that protects the owner and/or the lender against financial loss arising from certain title-related risks, including problems that may already exist on the title before you buy but only surface later.
There are generally two kinds. An owner's policy protects you, the homeowner, and typically stays in place for as long as you own the home. A lender's policy protects the lender's interest in the property and is often required as part of a mortgage. In many transactions a single policy is arranged that addresses both. Coverage, exclusions and limits vary by insurer and by policy, so it's worth reviewing the specifics with your lawyer.
Title insurance is not the same as home or property insurance. Home insurance covers physical damage to the building and its contents; title insurance deals with legal ownership and title-related defects. Most buyers carry both, because they protect against very different things.
What it protects against
Common examples of the title-related risks a policy may address.
Errors or gaps in the ownership record, such as a mistake in prior deeds or documents that could cast doubt on your clear ownership.
Undischarged debts registered against the property, like unpaid property taxes or a contractor's lien, that were in place before you took ownership.
Situations where someone fraudulently deals with your property or forges documents to affect your ownership, a risk that has drawn growing attention in recent years.
Problems such as an encroachment, a fence or structure over a boundary line, or a discrepancy that a survey would typically reveal.
Some policies address specific concerns like unpermitted work or certain outstanding municipal matters affecting the property. What is and isn't included depends on the policy.
This is a general overview, not a description of any specific policy. Every policy has its own terms, exclusions and limits, and title insurance does not cover everything. Your lawyer can walk you through what a given policy does and does not include for your purchase.
When it's purchased
Title insurance is typically arranged by your real estate lawyer as part of closing, and it's usually paid as a one-time premium rather than an ongoing monthly cost. An owner's policy generally lasts for as long as you own the home, so there's normally no renewal to think about later.
Because it's set up at closing, the premium is one of several closing costs to budget for alongside legal fees, land transfer tax and adjustments. Your lawyer coordinates the policy and folds it into your closing figures, so you'll usually see it itemized on your statement of adjustments.
To understand who arranges it and how it fits your overall budget, see our overview of real estate lawyers and our breakdown of closing costs.
Related pages
Real Estate Lawyers
Who handles your closing and arranges title-related matters.
Closing Costs
The one-time costs to budget for when your purchase completes.
Professional Partners
The professionals who support you through a real estate transaction.
Buying a Home
A step-by-step look at the home buying and mortgage process.
Questions about closing protections?
We'll point you to the right resources and coordinate your file.