Title insurance is insurance that protects a property owner or lender against financial loss from title defects, such as undiscovered liens or ownership disputes, not identified during the title search. Unlike most insurance, title insurance protects against past events that could affect the property's ownership, providing coverage even for issues that existed before the policy was issued but weren't discovered.
Owner's policy vs lender's policy
| Policy type | Who it protects |
|---|---|
| Owner's title insurance | Protects the buyer/owner's equity interest in the property |
| Lender's title insurance | Protects the lender's interest, typically required for financed purchases |
What to watch for before committing
Owner's policy consideration even if not required
Consider obtaining an owner's title insurance policy even if your lender only requires a lender's policy, since only an owner's policy protects your equity interest.
Coverage amount adequacy
Confirm the policy coverage amount adequately reflects the property's actual value, particularly important if the property appreciates over time.
Policy exclusions review
Carefully review policy exclusions, since not all title issues are automatically covered under a standard policy.
Title company reputation and financial strength
Select a reputable, financially strong title insurance company given the long-term nature of the coverage.
Survey coordination with title insurance
Coordinate any property survey with your title insurance, since certain coverage extensions may depend on survey findings.
Claims process understanding
Understand the claims process and what documentation would be needed if a title issue arises after closing.
When you need to know this
- Purchasing commercial property — protecting your equity interest against undiscovered title defects
- Financing a property acquisition — satisfying lender requirements for title insurance
- Long-term property ownership — maintaining protection against title issues throughout your ownership period
- Evaluating overall transaction risk — understanding this important protective layer beyond the title search alone
Frequently asked questions
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