Your guide to title insurance

Title insurance is a crucial step before closing on your new home. It ensures that you and your exciting new purchase are protected against any claims that could come up once ownership is transferred to you. If an unknown relative of the seller comes knocking on your door claiming they own your house, title insurance is there to help protect you.

What is title insurance?

Title insurance is a preventative measure regarding the ownership of your home and is purchased before closing on a house. Title insurance is different than homeowners insurance. Homeowners insurance protects against future damages to your property while title insurance is a preventative measure surrounding ownership rights.

When you buy title insurance, title examiners inspect the history of your home. They may also clear up any ownership issues that could come up in the future. This protects you from covered legal costs or proceedings that would occur if a claim were made.

The difference between title insurance and mortgage insurance

It’s key not to confuse title insurance with mortgage insurance. Title insurance protects the lender and you, the new homeowner. Mortgage insurance, however, only protects the lender in the event you may not be able to repay your mortgage loan. Mortgage insurance is added to your monthly mortgage payments, whereas title insurance is paid upfront.

Why do you need title insurance on a mortgage?

There are a few reasons why you may need title insurance on a mortgage. The most common reason for needing title insurance is if a claim to your title arises. A claim would be anything that threatens ownership of your home, like a misfiling of ownership records or an unresolved hold on the property. Just remember, you can file a claim after you’ve closed, but title insurance only protects against things that happened in the past. Title insurance helps protect you in these scenarios and allows for easier selling in the future, since the term lasts for as long as you own the home.

With title insurance, you know that if anyone knocks on your door and claims that you don't own your home, you’re protected. Even if a claim ends up being correct and the home somehow belongs to someone else, title insurance should protect your ownership status and the money you’ve put towards the home.

What types of title insurance are there?

There are two types of title insurance: owner’s title insurance and lender’s title insurance. Owner’s title insurance protects the owner of the house if there is a claim filed. Lender’s title insurance protects the lender and is often required to receive a mortgage. The purpose of lender’s title insurance is to protect the lender in the event there is a claim made against the home.

How much does title insurance cost?

Title insurance is a one-time premium paid as part of your closing costs. The price is often state regulated and usually depends on the value of your house. You can use a title insurance calculator to help determine how much your premium would cost.

Title insurance protects your ownership over a new home. It’s a one-time cost that lasts for the life of your mortgage and is meant to protect you from any covered claims that challenge the ownership of your house.