What Is Title Insurance and What Does It Cover?Updated October 6, 2022 Insurance
Your home is one of your most important investments. Title insurance can be a real lifesaver in the event of a title dispute or claim that threatens your home ownership. If you are a homeowner or someone looking to buy a home in the near future, consider purchasing title insurance from a reputable title insurance company.
Best Title Insurance Companies
- First American Title Insurance Company
- Fidelity National Title
- Old Republic Title
- Fidelity National Financial
- Chicago Title Insurance Company
- Stewart Title Guarantee Company
Part of the process of buying a home is obtaining the title. A home title grants you ownership of the property from the previous owner. But, what happens if the lawful ownership of your home comes under scrutiny? Title fraud, overlooked heirs, and liens are all factors that can put a homeowner's enjoyment and interest in their own home at stake.
That's why title insurance companies were formed. Title insurance exists to protect the homeowner or mortgage lender from financial losses or damages as a result of such a dispute.
What Is Title Insurance?
Title insurance is a form of insurance that protects a homeowner or mortgage lender from a third-party title claim that calls into question the title, or legal ownership, of a property. A title insurance policy covers the costs of legal fees to resolve any title claims or disputes that arise after a real estate closing.
When you take out a mortgage, your mortgage lender will run a title search to be certain the title is clear. A clear title ensures that you are the uncontested sole owner of the property. During a title search, public records are scoured for any possible title defects that could jeopardize your home ownership. Title defects include liens, easements, encumbrances, back taxes, and more.
While a title search usually goes smoothly, there are times when a title search will find a title defect that must be resolved before a real estate transaction can be finalized. Even if a title search was performed and you were given a clear title, the title search process isn't perfect. Hidden risks, like forgery, fraud, or document errors don't show up in public records and can threaten your home ownership rights.
However rare, there are instances where a third-party entity could contest your right to own your home after the sale goes through. For example, an overlooked heir to your home could turn up and claim they are the rightful owner. A property dispute or title claim like this could happen at any time.
Unlike other types of insurance such as life insurance or homeowners insurance, which covers problems that could occur in the future, title insurance protects the title insurer against past discrepancies in the legal ownership of a home.
6 Best Title Insurance Companies
To help you in your search for the best title insurance company, we've compiled a list of the top title insurance companies in the U.S.
First American Title
The largest title insurance company in the United States is First American Title. Started in Orange County in 1889, First American offers title insurance for homeowners, lenders, real estate agents, commercial property owners, home builders, and more. They are internationally recognized, with offices around the world, including in Canada, Mexico, and Hong Kong.
First American prides itself on offering ALTA (American Land Title Association) title insurance products that are streamlined and can be delivered in 60 seconds after a transaction. They have residential, commercial, and homebuilder title insurance policies available.
You can use the First American Title Insurance Company website to get a quote on title insurance or contact a title insurance agent to learn more.
Fidelity National Title Insurance Company
Founded in 1848, Fidelity National Title is another top title insurance provider in America. It is headquartered in Santa Barbara, CA, with a network of offices across the nation.
Fidelity National Title offers a superior homeowners title insurance policy that includes additional benefits in addition to standard coverage. These benefits include pre and post policy protections to protect you against title claims that are filed before and after your policy goes into effect, expanded access coverage, encroachment protections, continuous coverage even if you no longer have the title, and value-added protection so that the maximum costs your title insurance policy covers increases with the value of your home.
The homeowners title policy also protects against restrictive covenant violations, building permit violations, subdivision law violations, zoning law violations, water and mineral right damage, map inconsistencies, and supplemental tax liens. You can request a quote on title insurance from the Fidelity National Title website.
Old Republic Title
Based in Tampa, FL, Old Republic Title has been in business for over a century. Old Republic Title has held the highest customer ratings of any title insurance company in America since 1992. Their title insurance offerings are made available through a network of offices across the states.
An Old Republic Title title insurance policy protects against problems caused by a title defect, such as forgery or fraud, unpaid mortgages, easements, liens, an unmarketable title, and more. Title insurance from Old Republic Title stays good as long as you or your heirs own your home.
You can enter your information into their online Rate Calculator to get an estimate on how much their title insurance costs.
Fidelity National Financial
Fidelity National Financial is a Fortune 500 title insurance company that offers title insurance policies for residential and commercial properties. Their corporate headquarters is located in Jacksonville, FL.
Fidelity National Financial offers title insurance for both residential and commercial properties. Collectively, Fidelity National Financial title underwriters issue the highest number of title insurance policies to homeowners and commercial investors out of all title insurance companies in the United States.
Specific Fidelity National Financial title insurance coverage varies depending on a number of factors, including your location. You can request a title insurance quote by contacting Fidelity National Financial or visiting them online.
Chicago Title Insurance Company
As its name suggests, Chicago Title Insurance Company was founded in Chicago, IL in 1847 by Edward A. Rucker. Today, they offer comprehensive title and escrow services to real estate professionals and homeowners.
Chicago Title Insurance Company operates as a branch of Fidelity National Title, so they have similar title insurance policies available. The homeowners policy offered by Chicago Title Insurance Company and Fidelity National Title gives homeowners extra coverage benefits such as pre and post coverage protection, value-added protection, and continuous coverage.
To get an estimate on how much a Chicago Title Insurance Company title insurance policy will cost you, you can use their online rate calculator or contact a title agent.
Stewart Title Guarantee Company
Stewart Title Guarantee opened its first office in Galveston, TX in 1893. Now, the company is a leading, award-winning title insurance business on a worldwide scale. They offer title insurance services to homeowners, sellers, real estate agents, lenders, home developers and builders, real estate investors, and commercial property owners.
A title insurance policy from Stewart Title Guarantee will give you coverage of title problems that were not found in public records during a title search before you closed escrow. A few examples of covered losses include documents forged by false or expired powers of attorney, undisclosed heirs, improperly made documents, rights of divorced parties, utility easements, gaps in the chain of title, state inheritance, gift tax liens, and much more.
You can contact Stewart Title Guarantee Company to request more information on specific title insurance policy coverage and costs.
How Does Title Insurance Work?
Title insurance works by charging you a one-time title insurance premium for coverage of any legal fees that could occur from a title dispute. There are no monthly or annual premiums associated with title insurance. Usually, a title insurance policy lasts as long as you own the property you are insuring. There are two types of title insurance: an owner's policy and a lender's policy.
While title insurance policies protect you or your mortgage lender from losing money due to a title claim, title insurance is not a substitute for legal advice or running a title search when buying a property.
A lender’s policy, or loan policy, protects your mortgage lender from losing money as a result of property ownership issues or disputes. This type of policy is valid for the entire term of your mortgage.
An owner’s policy shields you, the homeowner, against property disputes, title claims, or any other issues surrounding your legal right to own your home. This type of title insurance stays valid for the duration of the time you own your home.
Warranty of Title
There is a third alternative, however. A warranty of title, which may or may not be included in the sale of a home, is a guarantee that the seller of the home has the sole, lawful ownership of a house and that nobody else can claim property rights. If someone does lay a claim to your home after it is sold to you, a warranty of title gives you the right to seek legal recourse against the person who sold you the home.
A warranty of title is not always included by default, and it does not have as much coverage as title insurance. Especially in cases where the seller is a representative rather than the owner of the home, such as auctions or estate sales, a home warranty is usually not given. This is because the seller may not be aware of the entire history of the home or any potential conflicting claims.
Is Title Insurance Required?
Lenders will require you to purchase a lender's policy before giving you a mortgage. Just like with mortgage insurance or flood insurance, to protect their investment, part of a mortgage lender's loan policy will necessitate that you pay for a lender’s title insurance policy as one of your closing costs when taking out a mortgage on a home.
You also have the option to purchase title insurance yourself to protect your rights to the property. An owner’s policy is not required, but it is highly recommended.
Especially if you're on a budget, you may be wondering: Is title insurance worth it? The answer you will get from anyone involved in real estate is a resounding yes. For most homeowners, their house is their most valuable asset. The peace of mind gained from paying the upfront cost of title insurance is definitely worth the price.
Most title insurance businesses have options to bundle both types of title insurance together in a single package. However, it is important to note that not all title insurance policies are the same. Before purchasing a title insurance policy, read the fine print so you fully understand just what the policy does and does not cover.
What Does Title Insurance Cover?
The specifics of what a title insurance policy covers depend on the type of title insurance policy. A lender’s policy provides different coverage than an owner’s policy.
Though covered losses depend on your title insurance company, an owner’s title insurance policy typically covers common title problems and risks that could jeopardize your home ownership. These risks include errors or mistakes in public records like wrong signatures, undisclosed easements, ownership claims like conflicting wills, liens, encumbrances, lawsuits, and blatant forgery or fraud.
A lender’s loan policy always necessitates that the borrower purchase a lender’s title insurance policy before a home mortgage is granted. Most often, a title company will issue a lender’s policy after a title search is performed and the title insurance premium for the policy will be included in your closing costs.
While covered losses are similar between owner's and lender's title insurance, the lender’s policy coverage depends on the amount of your home loan. Your mortgage lender will be covered up to the amount your home loan costs to protect them from financial losses in case the transfer of title rights falls through.
How Much Does Title Insurance Cost?
The price of a title insurance policy premium varies depending on the state you reside in and your title insurance company. The title insurance cost can be anywhere between $500 and $3,500. Remember that this is a one-time fee, and you do not have to pay monthly or annual payments to keep your title insurance.
While you as the buyer will need to purchase a lender's policy before taking out a mortgage, you can negotiate with the seller to have your owner's title insurance policy factored into the sale of the home. Or, you can opt to purchase it separately on your own.
Usually, the title insurance process is initiated by your real estate closing agent, title agent, or a similar third-party professional after your purchase party agreement is finalized. In some cases, you may be required to have both lender's and owner's title insurance before the real estate transaction can close.
How To Save on Title Insurance
Title insurance is essential for homeowners who want security knowing that they will never have to shell out huge legal fees to defend their right to their own home. In case of a title claim or dispute, title insurance will take care of expenses incurred from legal proceedings. While title insurance is worth the one-time title insurance cost when you buy your home, there are ways to make sure you get the best deal on title coverage.
If you are going to be purchasing both a lender’s policy and an owner’s policy, you can save money on both by bundling them together. Ask your title company about the "simultaneous issue rate" which will give you both types of title insurance at a discounted rate if you buy them at the same time.
Another way to save on title insurance is by asking the seller to pay for a portion, or the entirety, of your owner's title insurance policy. You could also negotiate with the seller to pay a certain amount of your total closing costs, which would cover some of your title insurance costs and other expenses, like a home warranty. Another option is to ask your lender for a discount on overall closing costs to help reduce your upfront costs.
When buying a home, adding on another expense is never enjoyable, especially if you are trying to be frugal. However, the value of title insurance pays for itself, as you will never have to worry about a legal dispute over the lawful ownership of your home.