Title Insurance
Title insurance protects you against any errors in record for who is listed as a registered owner of your home.
Title insurance is an insurance policy that you purchase when buying a house – it protects you against any errors in record for who is listed as a registered owner of your home.
What is title insurance?
Let’s start from the beginning: ‘Title’ is a legal way of saying you’re the registered owner of something, so in real estate that means your property.
But you’ve just bought your home, so don’t you already own it? Great question. In real estate terms, there’s a difference between ownership and title, and to properly own something in full you need to have both. When you purchase a new property, the title is passed down from the previous ownership to you. However, that doesn’t mean that someone else can’t come along and decide they have rights to the title.
Title insurance protects you in case someone tries to take that right away from you. It also protects you from a whole host of tricky circumstances, including any outstanding court cases or debts against the property.
What does title insurance cover?
Title insurance is split into two types of policies:
- Owner’s title insurance (aka homeowner’s title insurance), which covers the home buyer
- Lender’s title insurance (covers the mortgage lender)
In both cases, the coverage is the same. And whether or not you’re responsible for paying both policies depends on the rules of your mortgage.
A typical title insurance policy covers for the following hazards:
- Fraudulent claims on the property
- Incorrect signatures on documents
- Mistakes in record-keeping
- Outstanding court cases or tax debts against the property
Real-world examples: when title insurance saves homeowners
Title insurance isn’t just a formality. It resolves real, costly disputes that arise from a property’s past. Here are four common scenarios where title insurance protects homeowners from unexpected financial and legal exposure.
Scenario 1: Unpaid property taxes from a previous owner
After closing on their new home, a buyer received a notice from the county tax authority demanding $8,400 in unpaid property taxes owed by the seller from three years prior. The title search failed to surface the lien because of a clerical error in county records.
| Details | |
|---|---|
| The problem | $8,400 tax lien from a previous owner, missed due to a county records error |
| Without title insurance | Buyer pays the full $8,400 out of pocket, plus any associated legal fees |
| With title insurance | Insurer covered the full $8,400 liability and legal fees — zero out-of-pocket cost to the buyer |
Scenario 2: An undisclosed heir claims ownership
A buyer purchased a home from an estate. Two years later, a previously unknown heir surfaced with legal documentation claiming partial ownership of the property and filed a quiet title lawsuit, threatening to invalidate the buyer’s ownership rights entirely.
| Details | |
|---|---|
| The problem | Unknown heir files a quiet title lawsuit two years after purchase |
| Without title insurance | Buyer hires and pays their own attorney, bears all legal costs, risks losing partial ownership |
| With title insurance | Insurer covered all legal defense costs and resolved the claim — homeowner retained full ownership |
Scenario 3: Forged deed in the property’s history
A routine refinancing process uncovered that a deed transfer recorded 15 years earlier had been forged, meaning the chain of title was legally compromised. The lender refused to proceed and the homeowner faced the risk of losing their legal claim to the property.
| Details | |
|---|---|
| The problem | Forged deed discovered 15 years back, compromising the entire chain of title |
| Without title insurance | Homeowner responsible for all legal costs to correct the title — often $10,000 to $50,000 or more |
| With title insurance | Both lender’s and owner’s policies activated; insurer funded all legal proceedings to restore clean title |
Scenario 4: Boundary dispute with a neighbor
After purchasing a home, a buyer discovered that a portion of their driveway and fence was built on a neighbor’s property due to a survey error recorded decades ago. The neighbor threatened legal action to reclaim the land, which would have required the homeowner to relocate their driveway at significant cost.
| Details | |
|---|---|
| The problem | Survey error meant part of the driveway and fence encroached on a neighbor’s land |
| Without title insurance | Homeowner pays for new survey, legal fees, and driveway relocation out of pocket |
| With title insurance | Insurer covered new survey, legal negotiations, and compensated homeowner for the disputed land area |
Do you need title insurance?
Yes! You need to purchase title insurance as part of your mortgage process. However, owner’s title insurance might be optional, but lender’s title insurance will always be mandatory. Most real estate experts advise buying both.
Why? Well, there have been incidences where an older document proves someone else has the rights to your property. This is usually the result of past fraud or forgery, or inaccurate record keeping. In fact, the American Land Title Association reported that one in three properties have a title or public record defect.
So let’s say you’ve found your dream home, and out-of-nowhere you’re asked to pay a truck full of taxes that were not paid when due by a previous owner. In this case, your title insurance policy would cover the cost of the taxes, and protect you from any other financial loss due to mistakes in the property title.
Title insurance: with vs. without
| With owner’s title insurance | Without owner’s title insurance | |
|---|---|---|
| Legal defense costs | Covered by your insurer | Paid entirely out of pocket |
| Valid claims against your title | Paid by your insurer | Your personal financial liability |
| Property ownership disputes | Insurer handles resolution | You hire and pay your own attorney |
| Potential out-of-pocket exposure | $0 in most cases | $10,000 to $50,000 or more |
| How long you’re protected | For as long as you own the property | No protection |
When do I need to buy title insurance?
You’ll be asked to purchase title insurance during the mortgage process, and it’s usually a ‘must-have’ because lenders want to protect the house they’re using as collateral for a loan. If there are any disagreements around who owns the right to your property, your title insurance policy will kick in and pay the legal fees to place that title back in your name, or cover you in case you lose the house.
So let’s say you’ve just bought your dream home – (cue the fireworks) but along comes an individual with a document saying he owns the title to your home.
Could this really happen?
Technically yes, if a fraudster steals your personal information and transfers the title of your home to his name without your knowledge. Having title insurance pays for any sort of legal process you have to go through to fight the fraudster’s claim.
Who pays for title insurance?
Depending on your state’s regulations, the home buyer might be required to buy both the owner’s insurance and lender’s insurance. Alternatively, the home seller might need to buy either one or both policies.
How much does title insurance cost?
The cost of your title insurance depends on your state, how much you’re borrowing, and the specific location of your home. Typically, title insurance costs anywhere between $500 and $1,500 which you’ll have to pay just one time. According to Value Penguin the average cost of title insurance in 2024 is $544 for the lender’s policy and $830 for the homeowner’s policy, in total $1,374.
Why does it vary by state? Some states demand more thorough research from the title insurance company, which makes the policy more expensive.
FYI: The owner’s title insurance is typically a little more expensive than lender’s title insurance.
Title insurance FAQs
What is title insurance?
Title insurance is an insurance policy you purchase when buying a house that protects you against errors in property ownership records, fraudulent claims, unpaid debts, and other defects in the chain of title. It ensures that if someone challenges your legal ownership of the property, you are financially protected against legal costs and potential losses.
What is the difference between owner's title insurance and lender's title insurance?
Owner’s title insurance protects the home buyer and covers their ownership interest in the property for as long as they own it. Lender’s title insurance protects the mortgage lender’s financial interest in the property. Lender’s title insurance is almost always required when taking out a mortgage; owner’s title insurance is often optional but strongly recommended.
When do you buy title insurance?
Title insurance is purchased during the mortgage closing process, typically at the same time you pay your other closing costs. It is a one-time premium payment, not an ongoing monthly expense.
What does title insurance cover?
A standard title insurance policy covers fraudulent claims on the property, incorrect signatures on documents, mistakes in record-keeping, outstanding court cases or tax debts against the property, forged deeds, boundary disputes arising from survey errors, and claims from undisclosed heirs. Coverage applies to title defects that existed before you purchased the property.
Do you need title insurance?
Lender’s title insurance is required by virtually all mortgage lenders as a condition of the loan. Owner’s title insurance is typically optional, but most real estate experts recommend purchasing it. The American Land Title Association has reported that one in three properties have a title or public record defect, making owner’s coverage a financially sound decision for most buyers.
A few quick words, because we <3 our lawyers: This post is general in nature, and any statement in it doesn’t alter the terms, conditions, exclusions, or limitations of the policies issued, which differ according to your state of residence. You’re encouraged to discuss your specific circumstances with your own professional advisors. The purpose of this post is merely to provide you with info and insights you can use to make such discussions more productive! Naturally, all comments by, or references to, third parties represent their own views, and Lemonade assumes no responsibility for them. Coverage may not be available in all states. Please note that statements about coverages, policy management, claims processes, Giveback, and customer support apply to policies underwritten by Lemonade Insurance Company or Metromile Insurance Company, a Lemonade company, sold by Lemonade Insurance Agency, LLC. The statements do not apply to policies underwritten by other carriers.
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