Title Insurance

Title insurance protects against problems with the legal ownership of a property that existed before you bought it but surface afterward. Examples include a prior owner’s unpaid taxes or contractor liens, mistakes or fraud in recorded deeds, and unknown heirs claiming an interest. Unlike most insurance, the premium is paid once at closing rather than monthly, and it covers events from the past rather than the future.

There are two policies. A lender’s policy protects the lender’s interest up to the loan amount and is usually required. An owner’s policy is optional but protects your own equity in the home. Which party pays for each policy varies by state and is often negotiable, so on a seller net sheet title insurance appears as a closing cost whose size and assignment depend on local practice.