What is title insurance?

Title insurance protects against defects in a property's ownership history — forged deeds, undisclosed liens, errors in public records — that could challenge your legal right to the home after purchase. Lenders require it; an owner's policy is optional but strongly advisable.

When you buy a home, you're buying its title — the legal right of ownership. Title insurance protects that right against problems in the property's history that weren't discovered during the title search: undisclosed heirs, forged signatures in past deeds, recording errors, unpaid contractor liens, and more. Unlike car or health insurance (which protect against future events), title insurance protects against past events that surface after closing. The CFPB's closing guidance includes title insurance as a standard closing cost.

Lender's title policy vs. owner's title policy

There are two separate policies, and they protect different parties:

Lender's title policy (required): Protects the mortgage lender up to the loan amount. Every purchase mortgage lender requires this. You pay for it, but it doesn't protect you.
Owner's title policy (optional but recommended): Protects your equity in the home — your full purchase price. A one-time premium, typically $500–$1,500 depending on home price and state.
Both are issued after a title search reviews public records for liens, judgments, easements, and ownership history.
Coverage lasts as long as you (or your heirs) have an interest in the property.

What a title insurance claim looks like

After closing, a prior owner surfaces with a claim that they never legally transferred their interest. Or a contractor files a mechanics lien for unpaid work done before you owned the home. Or a clerical error in county records clouds your ownership. Without an owner's policy, you'd bear the cost of legal defense and any settlement yourself. With it, the insurer defends and pays — up to your policy limit. HUD's homebuying resources cover title insurance in the context of overall closing costs.

Can you shop for title insurance?

Yes — and the CFPB explicitly encourages it. Title companies set their own rates, and premiums can vary. Your Loan Estimate (delivered within 3 business days of application) will list title insurance under 'services you can shop for.' Comparing two or three title companies can save hundreds of dollars at closing.

Key facts

Lenders typically require a lender's title insurance policy on every purchase mortgage; an owner's title insurance policy is optional but protects the buyer's equity against title defects. — CFPB — Owner's Title Insurance
Title insurance is paid as a one-time premium at closing and provides coverage for as long as the insured party or their heirs have an interest in the property. — CFPB — Owner's Title Insurance
Title insurance is listed on the Loan Estimate under 'services you can shop for,' allowing buyers to compare title company quotes. — CFPB — Owning a Home

Key takeaways

Title insurance protects against defects in ownership history — forged deeds, hidden liens, recording errors — not future events.
The lender's policy is required (you pay for it); the owner's policy is optional but covers your full equity.
One-time premium at closing — coverage lasts for as long as you or your heirs own the home.
You can and should shop for title insurance — it's listed on your Loan Estimate under 'services you can shop for.'
Without an owner's policy, you'd pay out of pocket to defend your title if a claim surfaces after closing.