FAQs

A title insurance company is a specialized insurance company that protects homebuyers, lenders, and property owners from financial losses caused by problems with the property’s title (legal ownership).

The title is the legal proof that someone owns the property outright and has the right to sell or mortgage it. A “clean title” means there are no hidden claims, liens, or defects that could challenge ownership.

When you buy a house, even after a title search, some hidden issues might not show up until later. These are called title defects or title risks. If one pops up after closing, it can cost tens or hundreds of thousands of dollars to fix—or you could even lose the property.

Common hidden title problems include:

• Forged deeds or signatures in the past
• Undiscovered liens (e.g., unpaid taxes, contractor liens, HOA dues)
• Fraud or identity theft in the chain of ownership
• Mistakes in public records (wrong legal description, clerical errors)
• Unknown heirs claiming ownership
• Old mortgages that were never properly released

A Title Insurance Company prevents most of the problems by finding them before you close, defends your ownership in court if anyone challenges it later and pays money to fix covered title problems, sometimes hundreds of thousands of dollars at no extra cost to you. 

Without title insurance, you would be on the hook for all legal fees and losses if an old hidden claim ever surfaces. With it, the title insurance company takes on that risk for a one-time fee paid at closing.

1. Before Closing: They Investigate the Title (Title Search & Exam)

The title company (or its agent) digs through decades of public records: deeds, mortgages, liens, court judgments, tax records, wills, divorces, etc.

They look for anything that could cloud ownership (liens, easements, fraud, errors, competing claims).

They issue a Preliminary Title Report / Title Commitment that shows:

• Who the current legal owner is
• Any problems (“exceptions”) that must be fixed before closing
• What the final policy will and won’t cover
• This step catches 95%+ of issues before you own the home.

2. At Closing: They Clear Problems & Issue the Insurance Policies

They help resolve red flags (e.g., pay off an old lien, get a release from an ex-spouse, correct a legal description).

They make sure the seller actually has the legal right to transfer the property to you.

• They issue two policies at closing:
• Lender’s policy (required by your mortgage company)
• Owner’s policy (optional but strongly recommended — protects YOU)

You pay a one-time premium (usually 0.5–1% of the home price).

3. After Closing: They Protect You if a Hidden Problem Appears

This is where title insurance is worth its weight in gold. Even the most thorough search can miss things that are not in public records.

If someone sues you claiming they own your house (or part of it), the title company:

• Provides and pays for your legal defense (100% covered, no deductible in most policies)
• Pays valid claims or settles with the claimant
• If you somehow lose the title entirely (extremely rare), they pay you the full policy amount (home value at closing or current value, depending on the policy type)

4. Ongoing Protection (Forever for Owner’s Policy)

Owner’s title insurance lasts as long as you or your heirs own the property — no renewals, no extra payments.

Lender’s policy lasts until the mortgage is paid off.

Owner’s title insurance policy

• Protects the homebuyer (you) for as long as you or your heirs own the property
• One-time premium paid at closing (usually 0.5–1% of the purchase price)
• Covers your equity and ownership rights

Lender’s title insurance policy (required by almost every mortgage lender)

• Protects the bank/lender in case the title has problems
• Also a one-time premium (usually paid by the buyer)
• Only covers the lender, not you

Only once. There are no recurring payments, no monthly bills, no annual renewals, and no premiums ever again.