Why am I paying for title insurance, and what does it actually cover?

Why do I need title insurance?

You're buying title insurance to protect against ownership problems that could come up after you close on the house. The cost covers two separate policies: one that protects the lender and one that protects you as the homeowner.

Title insurance covers issues with the property's ownership history that a title search might miss. Common problems include unpaid liens, forged documents, errors in public records, or claims from previous owners or their heirs. The lender's policy protects their mortgage investment, while the owner's policy protects your ownership rights and equity in the home.

Your Closing Disclosure shows the exact cost for both policies under Section H. The lender's policy is typically required and based on your loan amount. The owner's policy is optional but covers your purchase price and protects you from financial loss if someone successfully challenges your ownership.

Most buyers choose the owner's policy since title problems can be expensive to resolve in court. The one-time premium gives you coverage for as long as you own the property. Ask your lender or title company to explain the specific coverage amounts and any exclusions listed in the policies.