Title insurance protects homebuyers by defending your ownership rights against problems that affect the title to your home, such as liens, easements, use restrictions, and bankruptcy claims. Whether you are buying a new or existing home or refinancing, it covers you legally and financially if someone else claims an interest in your property.
Key facts
- There are two types of title insurance: an owner's policy that protects your property rights and a lender's policy that protects the bank.
- An owner's policy is a one-time fee, typically around 0.5% of the home's purchase price.
- Your owner's policy stays in force for as long as you or your family own the property, even after a refinance.
- Title Resources Inc. is locally owned and has closed over 10,000 titles across Missouri, Illinois, Colorado, Florida, and Indiana.
What are the two types of title insurance?
There are two types of title insurance: the owner's policy and the lender's policy. The owner's policy protects your property rights as the homebuyer, while the lender's policy insures the financial investment of the bank or lender. If someone else claims ownership of your property, title insurance typically defends you both legally and financially.
What title problems does it protect against?
A title search uncovers many issues before closing, and title insurance covers certain problems that surface later. Common risks include the following:
- Liens that secure payment of an obligation, such as mortgage liens, judgment liens for unpaid court judgments, federal tax liens, state and local liens for unpaid real estate taxes or assessments, mechanic's liens for property improvements, liens for child support, or (as in New York City) liens for unpaid parking tickets.
- Easements created by contract or arising through use or adverse prescription, such as utility rights of way or rights a neighbor acquires because of a fence encroachment.
- Building or use restrictions contained in recorded plats, agreements, or deeds.
- Claims arising out of bankruptcy.
These are just some of the reasons owner's title insurance is crucial when buying or refinancing. It gives you peace of mind that your property rights are protected.
Do you need title insurance when you refinance?
When you refinance, you are obtaining a new loan, even if you stay with your original lender. Lenders usually require a new title search and a new lender's policy to protect their investment in the property. Fortunately, you do not need to buy a new owner's policy, because the one you purchased at closing remains good for as long as you or your family own the property. You may still want to contact an ALTA member to update your policy to reflect changes in your life.
How much does owner's title insurance cost?
Owner's title insurance is a low, one-time fee based on the value of your home. A typical owner's policy costs an average of about 0.5% of the home's purchase price. With a home being one of the largest investments you will ever make, that one-time cost is a smart way to secure long-term peace of mind.
Common questions about how title insurance protects homebuyers
Does title insurance cover both the buyer and the lender?
Only if you buy both policies. A lender's policy protects the bank for the mortgage amount and is usually required to get a loan. An owner's policy is separate and protects your equity, so most buyers purchase both to be fully protected.
Is a title search the same as title insurance?
No. A title search reviews public records to find known problems before closing, while title insurance protects you against covered defects that the search may miss. The two work together: the search reduces risk, and the policy covers what remains.
Does my owner's policy carry over after I refinance?
Yes. Your owner's policy stays in force for as long as you or your family own the property, regardless of how many times you refinance. A refinance requires a new lender's policy, not a new owner's policy.
What does title insurance not cover?
Title insurance covers defects tied to the property's title and history, not physical damage, maintenance, or issues you create after closing. For exact terms, conditions, exclusions, and limitations, contact a title insurance company authorized to do business in your location.
Title Resources Inc. (The Title Guy) helps homebuyers and homeowners protect their property rights across five states. Call (636) 527-9670 or email orders@TitleResourcesInc.com, or start your order at titleresourcesinc.com/order-title/.
