Title insurance.
In plain English
Title insurance is a policy that covers losses caused by problems with a property's legal ownership history, called the title. Before closing, a title search looks for issues like unpaid back taxes, old liens, forged documents, or unknown heirs who could claim the property. Title insurance pays to defend or settle those claims if one surfaces after you buy. Unlike most insurance, you pay a single premium at closing, and it covers you for as long as you own the home. There are two policies: a lender's policy, usually required, and an owner's policy, which is optional but protects your own equity.
01Why it matters
A hidden ownership claim can threaten the home you just spent your savings on, and without an owner's policy you could pay legal bills, or lose equity, through no fault of your own.
02The math, step by step
A year after you buy, a contractor who was never paid by the previous owner files a lien against your home for $9,000. The title search missed it. If you bought an owner's title insurance policy at closing, the insurer handles the claim and the cost. If you only had the lender's policy, the lender is protected but you could be paying that $9,000 yourself.
03What this is NOT
Homeowners insurance covers physical damage going forward, like fire or theft. Title insurance covers legal ownership problems rooted in the past, before you owned the home. They protect against completely different risks and you typically need both.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
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