At your closing, you’ll pay for title insurance — and most buyers don’t know exactly what they’re buying. Here’s a clear explanation.
What Is Title?
“Title” refers to legal ownership of a property. When you buy a home, the seller transfers title to you, and the deed is recorded in the county records.
What Problems Can Arise With Title?
Before you can receive clear title, there should be no outstanding:
- Unpaid mortgages or liens
- Unpaid property taxes
- Mechanic’s liens (contractors who weren’t paid)
- Judgments against the seller
- Undisclosed heirs who have a claim
- Errors in previous deeds
- Forged documents in the chain of title
- Easements that weren’t disclosed
The title company researches the property’s title history to identify and resolve these issues before closing.
Lender’s Title Insurance vs. Owner’s Title Insurance
Lender’s title insurance: Required by virtually all mortgage lenders. Protects the lender against title defects up to the loan amount. You pay for it at closing.
Owner’s title insurance: Optional, but strongly recommended. Protects you (not just the lender) against title defects up to the purchase price. In California, sellers often pay for the owner’s policy as a custom, though this is negotiable.
What Does Title Insurance Cost?
One-time premium paid at closing. In California, roughly $1,000–$2,500 depending on purchase price. Unlike auto or health insurance, there are no ongoing premiums.
When Does It Actually Pay Off?
Title claims are rare — but catastrophic when they occur. Examples:
- A previously unknown heir emerges claiming ownership
- A forged deed from 30 years ago is discovered
- An undisclosed mechanic’s lien from a renovation appears
Without owner’s title insurance, you’d fight these battles at your own expense and risk losing the home. With it, the title insurer defends the claim and pays any covered losses.