To most homebuyers, title insurance is just another one of the many closing costs you will come across on closing day. You don’t know much about title insurance, just that your lender requires a lender’s policy for their own protection and now you’re offered the choice to purchase an owner’s policy. You’re not sure what to do, what even is an owner’s policy, is title insurance worth the cost? Here’s what title insurance is, what it protects you from and why it may be something you don’t want to opt out of.

What Is Title Insurance

Title insurance is a type of insurance that protects the ownership of a property. During a real estate settlement two different policies come into play: the required lender’s policy and an optional owner’s policy. These two policies are a one-time cost and will protect your rights for as long as you own the property.

When you purchase title insurance, the title company will do multiple searches that check the property’s ownership history.

What Does a Title Insurance Company Search For?

During the title search, the title company looks for any outstanding mortgages, judgments, liens and unpaid taxes associated with the property. The title company will also search for any restrictions, easements, leases or other issues that could affect property ownership. A survey could be required to determine the boundaries of the plot of land that a home sits on, to investigate any encroachments on the property by neighbors and or also any easements that may impact ownership. Unsure of what some of these terms mean? Check out our article on common title terms here.

The title searches come back clean and it appears the title is clear. So why buy title insurance? Some undiscovered issue could affect the ownership of the property years after the purchase. A clerical mistake in the ownership history, an error made by the title examiner, a previously unknown heir, improper filing or execution of documents, expiration of a lien that was extended or even a recording of a lien after the search was conducted.

A title issue that comes up after settlement could result in expensive legal fees and the loss of your property.

Is Title Insurance Worth The Cost?

Title insurance cost’s can vary largely from a few hundred dollars to a couple of thousand dollars. There are several factors that can affect the cost of your premium. Some of these factors include the title search, examination, and expected cost of any title issues. The amount varies widely from state to state and depends on the price of your home. The average cost of title insurance is around $1,000 per policy.

Is title insurance worth the cost? Many can make an argument against purchasing it, but as we learned earlier, title defects can come up long after you’ve settled on your property that could cost thousands if not hundreds of thousands and your ownership of the property. For most, it’s a matter of being safe rather than sorry.

Use our title calculator to estimate closing costs by clicking on the “Get a Quote” widget located on the bottom right screen on any page on our website. Curious about what all those other “closing costs” are? Watch our video on Closing Costs Explained Here.