Title insurance: what it covers, what it costs, and whether you need it

Title insurance covers losses from defects in the title that existed before you purchased the property — including unpaid liens (contractor, tax, or mortgage liens), fraudulent deeds, identity theft in a prior transaction, forgeries, undisclosed heirs, boundary disputes revealed by a survey, and errors in public records. Crucially, it is a one-time premium that covers you for as long as you own the property. The CFPB's owner's title insurance guide explains the difference between what is and isn't covered by a standard policy.

Lender's title insurance (also called a loan policy) is required by your mortgage lender and protects the lender's interest up to the loan amount. It only covers the lender — not you. Owner's title insurance (the buyer's policy) is optional but protects your equity and purchase price. On a $400,000 home, you'd be buying the lender's policy to protect their $320,000 loan — but your $80,000 down payment and all future appreciation is only protected if you also buy the owner's policy. The CFPB Loan Estimate form lists both policies separately in Section H of the closing costs.

Title insurance premiums vary by state and purchase price but typically run $500–$3,500 for an owner's policy on a $400,000 home. In some states (Florida, Texas, New Mexico), rates are set by the state insurance commission. In others, title companies compete on price. Unlike other insurance, it is a one-time premium — no annual payments. The American Land Title Association has a title premium estimator and explains the search and examination process that precedes the policy.

A title search examines public records to trace the chain of ownership and identify any claims against the property — typically going back 40–60 years or to the original land grant. Searches examine deeds, mortgages, tax records, court judgments, and municipal liens. Despite thorough searches, certain defects are inherently undetectable from public records — forged deeds, identity theft in prior transactions, and undisclosed heirs. This is exactly why title insurance exists as a backstop. ALTA's title search explainer covers the full scope of what a professional search examines.

Yes, in most states you can choose your own title company and shop for the best rate. Your lender will require a title policy from an approved provider, but that list is often broad. On the Loan Estimate (Section C — services you can shop for), title insurance appears as a shoppable service. Comparison shopping is worthwhile — premium differences of $300–$800 on the same policy are common. The CFPB's Loan Estimate guide explains which closing costs are shoppable and how to compare title company quotes.

Title insurance is not mandatory in Canada but is widely recommended and typically required by Canadian lenders. The Canadian system differs from the US: Canadian properties have a land registration system (Torrens title in most provinces) that government-guarantees registered title, reducing some (but not all) title defects. However, survey defects, zoning violations, outstanding work orders, and fraud still occur. FCAC's title insurance guide for Canada explains how Canadian title insurance works, what it covers, and where the Torrens system leaves gaps.