Title Insurance
Also known as: Title Policy, Owner's Title Insurance
An insurance policy that protects the buyer (and lender) from financial loss if a problem with the property's title is discovered after closing — such as outstanding liens, ownership disputes, or recording errors.
Detailed Explanation
Title insurance provides protection against defects in the property's title that were not discovered during the title search. Even a thorough search can miss issues — forged documents, unknown heirs, recording errors, or liens that were not properly recorded.
There are two types: a lender's policy (required by your mortgage company) and an owner's policy (optional but strongly recommended). The lender's policy only protects the lender; the owner's policy protects you.
In new construction, title insurance is especially important because of the risk of mechanic's liens. If the builder did not pay a subcontractor, the subcontractor may file a lien against your property.
In Your Contract
Title insurance is typically arranged as part of the closing process. Your Closing Disclosure will show the premiums for both lender's and owner's policies.
Key Points
- 1Protects against title defects discovered after closing.
- 2Two types: lender's policy (required) and owner's policy (recommended).
- 3A one-time premium paid at closing.
- 4Especially important in new construction due to mechanic's lien risk.
- 5Purchase the owner's policy — it costs relatively little for significant protection.
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