Title Insurance

Title insurance protects against problems with a property's ownership history, such as undisclosed liens, boundary disputes, errors in public records, fraud in the chain of title, or an heir who claims ownership.

There are typically two policies: a lender's policy (required by nearly all mortgage lenders) and an owner's policy (optional, but strongly recommended). The lender's policy only protects the lender. The owner's policy protects you as the buyer.

Unlike most insurance, title insurance is a one-time premium paid at closing, not an ongoing monthly cost. The owner's policy protects you for as long as you own the property.

Title issues are rare, but they happen. A lien from a previous contractor, a recording error at the courthouse, or a dispute over the property's legal description can create significant legal and financial problems after you close. Title insurance covers the cost of resolving these issues, including legal fees, so you're not paying out of pocket.

In Alabama and Tennessee, it's customary for either the buyer or seller to pay for the owner's title policy depending on local practice and what's negotiated in the contract. Your agent can explain what's typical in your area.

A couple buys a home and closes with an owner's title insurance policy. Two years later, they discover that a contractor placed a mechanic's lien on the property for unpaid work done before they purchased, a lien they had no way of knowing about. Their title insurance covers the cost of resolving the lien.

"A title search is the same as title insurance."

The title company conducts a title search before closing to look for known issues in the public record. Title insurance covers issues that the search misses, couldn't find, or that arise later due to fraud or error. The search finds what's there; insurance covers what wasn't found or what emerged afterward.