Title insurance is one of those closing costs that most buyers pay without fully understanding. It’s not like other insurance — you pay once, it never expires, and it covers the past rather than the future. Here’s what it actually does and whether you should buy it.
What title insurance covers
When you buy a home, you’re buying the legal right to own it. But what if there’s a problem with that ownership chain from years or decades before you bought it? Title insurance protects against defects in the title — issues that exist in the property’s history that weren’t discovered before closing. Common covered issues include forged signatures on past deeds, undisclosed heirs with ownership claims, errors in public records, unpaid liens from previous owners (contractors, taxes, HOA fees), fraud, and boundary disputes.
Two types of title insurance
- Lender’s title insurance (required). Protects the mortgage lender’s interest in the property. Almost always required when you take out a mortgage. Covers the lender for the loan amount — not you personally. This is typically the larger of the two premiums.
- Owner’s title insurance (optional). Protects you, the homeowner, for as long as you or your heirs own the property. Covers your equity and legal defense costs if someone challenges your ownership. This is what’s actually optional and worth evaluating.
How much it costs
Title insurance is a one-time premium paid at closing. Lender’s title insurance typically runs $500–$1,500. Owner’s title insurance, when purchased simultaneously, usually costs an additional $300–$900 — less than if purchased separately. Total cost varies by property value, state, and title company. In some states, title insurance rates are regulated; in others, they vary by provider (which means you can shop around).
Is the owner’s policy worth it?
The case for buying it: it’s a one-time payment for lifetime coverage, the cost is relatively small relative to your total investment, and title defects — while rare — do happen. A single ownership dispute or undisclosed lien could cost far more to resolve than the premium. The case against: a thorough title search before closing catches most issues, and many title problems that do arise are covered under the lender’s policy indirectly. For most buyers, the owner’s policy is worth the relatively modest cost — especially on older homes with longer title histories where the risk of a past defect is higher.
How to reduce the cost
In states where rates aren’t fixed, shop the title company. You’re not required to use the lender’s preferred provider. Ask about a “simultaneous issue” discount — buying both policies from the same company at closing is almost always cheaper than buying separately. Also ask about a “reissue rate” if the property was recently sold — many title companies offer a discount if a policy was issued within the last 10 years.