Title Insurance Explained

Content Written By: April Wilson, Ryan Winter LLC contributing writer

Title Insurance can be a tricky subject because there are a couple of different types of policies, and it is very different from other types of insurance. Title companies in Jacksonville and North Florida title companies work hard to fully investigate each title to make sure the title is “clean” before any title transfer. 

Title companies in Florida and across the country search through as many public records as possible to make sure there are no claims against a title. Title insurance covers any possible missed public records showing a claim, lien, etc. against the title. 

Most mortgage lenders will require title insurance for its protection, but keep in mind that this policy only covers the lender’s interest. What about the buyer? How is the buyer protected, and what does a buyer need to know before purchasing title insurance? 

Two Types of Title Insurance Policies

There are two main types of title insurance policies. One to protect the lender’s interest and one to protect the new homeowner’s right to the title of the home. 

US Patriot Title, a title company that provides services in the Jacksonville area and across the state of Florida, can help provide a preliminary title search, a full title search, access to title insurance, and more to help protect both lenders and homeowners interests. US Patriot Title recommends both the lender and homeowner have title insurance as an extra layer of protection. 

Lender’s Policy

What Is It? The lender’s policy protects the mortgage lender’s money. This policy makes sure the lender can get its money back if there is an issue with the title.

Why Is It Required? Most lenders require homeowners to get this policy to protect, “the bank or other lending institution for as long as they maintain an interest in the property (typically until your mortgage is paid off),” according to First American Financial Corporation.

What Does It Cover? The insurance protects the lender’s interest “against loss or damage occurring from liens, encumbrances, or defects in the title or actual ownership of a property,” Investopedia says. Basically, if there is any unknown but recorded claim to the title that the title company didn’t uncover, the title insurance will make sure the lender still gets their money back, plus cover court costs. 

What Does It Not Cover? Title insurance does not cover damage to the home itself, any issues that do not pertain to the title, government ordinances or regulations, or any issues with the title that incur after the closing date. “Unlike traditional insurance, which protects against future events, title insurance protects against claims for past occurrences,” according to Investopedia. There are many other variables and possible exclusions depending on the insurance company and the state in which the home is in. It’s recommended to read through and examine the full insurance policy prior to purchasing. 

How Much Is It? Forbes.com explains that title insurance “unlike traditional insurance companies” only requires a “one-time payment.” This means there is not a monthly or annual payment necessary. Forbes.com says that most lender policies average around “$544”. This, of course, will vary state to state and with the price of the property. 

Owner’s Policy

What Is It? This policy makes sure the new homeowner can fight to keep their property or get their money back if there is an issue with the title. The biggest difference between the owner’s policy and the lender’s policy is that the owner’s policy protects the owner’s right and interest to the title versus protecting the lender. 

Why Is It Required? It’s not required. Lenders will most likely require a lender’s policy, however, this only protects the lender’s interest. An owner’s policy is not required, but recommended. “It’s wise to purchase an owner’s policy of title insurance, which will protect your rights as the homeowner, generally for as long as you or your heirs have an interest in the property,” First American Financial Corporation says. 

What Does It Cover? First American has a full breakdown of what most owner’s policies include. According to First American, most policies include things like: Forgery, a lack of competency of legal authority, undisclosed (but recorded) mortgage, lien, easement or use restriction, deed not properly recorded, and more

What Does It Not Cover? Like a lender’s policy, an owner’s policy does not cover damage to the home itself or any issues that do not pertain to the title. The policy also would not cover things like government ordinances or regulations or any issues with the title that incur after the closing date. 

How Much Is It? The cost for an owner’s policy averages around “$834,” according to Forbes.com.

So, Is Title Insurance Necessary?

Buying a home is potentially one of the most expensive and important purchases in a person’s life. Protecting the owner’s claim to the title of such a big purchase is well worth the one-time payment. The mortgage lender will most likely require a lender’s policy, but it is also wise for the homeowner to protect themselves and their interest in the home. If anyone tries to come back and sue for a claim to the title, the title insurance will provide the money to help fight against that claim in court, and potentially protect the homeowner’s investment into the home, if needed.