When you’re buying a home, title insurance might not be top of mind, but it’s one of the most important for protecting your investment. Title insurance is a one-time cost, typically ranging from $500 to $3,500 per policy, that protects both buyers and lenders from costly legal disputes tied to a property’s ownership history.
From undiscovered liens to recording errors and ownership disputes, title insurance offers lasting peace of mind. This Redfin article will break down how much title insurance costs, what’s covered, and important FAQs you may have.
In this article:
- What is title insurance?
- How much does title insurance cost?
- What does the cost of title insurance cover?
- Is title insurance worth the cost?
- FAQs
What is title insurance?
Title insurance is a type of coverage that protects against potential issues with a property’s ownership history that could affect your legal rights to the home. These issues – often called “title defects” – can include unpaid property taxes, liens, disputes over ownership, errors in public records, or even fraud.
Unlike other forms of insurance that protect against future risks, title insurance safeguards you from problems that may have occurred in the past but weren’t discovered during the title search.
There are two types:
- Lender’s title insurance (required by your mortgage lender to protect their interest in the property until the loan is paid off)
- Owner’s title insurance (optional but highly recommended – it protects your ownership rights for as long as you or your heirs own the property)
How much does title insurance cost?
On average, title insurance costs between $500 and $3,500. For most homebuyers, this works out to roughly 0.5% to 1% of the home’s purchase price.
For example: If you’re buying a $400,000 home, title insurance might cost between $2,000 and $4,000.
Factors that influence the cost:
- The purchase price of the home
- The loan amount (for the lender’s coverage)
- Your state or local regulations
- The title company or insurer you choose
- Policy type
Who sets the rates?
In some states, title insurance rates are regulated, meaning all companies must charge the same amount based on a published rate schedule (e.g., Texas, Florida, New Mexico, and Pennsylvania). In other states, prices are more flexible and can vary between providers.
What does the cost of title insurance cover?
The premium you pay for title insurance includes more than just the policy itself. Here’s what’s usually bundled into the cost:
1. Title search & examination
A comprehensive investigation of public records to confirm the seller has clear ownership and legal authority to sell. This includes checking:
- Property deeds
- Court records
- Tax records
- Probate and divorce proceedings
- Liens or encumbrances
2. Clearing title issues
If issues are discovered during the title search (such as outstanding debts or claims), the title company works to resolve them before closing.
3. The insurance policy
Once the title is cleared, the policy is issued. If a covered issue arises after closing, the title insurer will:
- Cover legal defense costs
- Pay out financial damages up to the policy limits
Who pays for title insurance?
- Lender’s title insurance: usually paid by the buyer
- Owner’s title insurance: depends on local customs
The responsibility for paying the owner’s title insurance premium varies by location and negotiation. In some states, the buyer pays for the owner’s policy; in others, it’s customary for the seller to cover it. It’s also common for buyers and sellers to split the cost.
For instance, if you’re selling a home in Los Angeles and buying in Virginia Beach, the expectations around who pays may be completely different – so it’s important to understand what’s typical in each market. Your real estate agent can clarify what’s standard in your market.
Is title insurance worth the cost?
While the owner’s policy is optional, skipping it can be a costly move. Even homes with clean records can have hidden issues, like old liens or ownership disputes, that surface months or years after closing. If that happens, you could face expensive legal battles without coverage.
Without a policy, you’d be responsible for attorney fees, court costs, and potential settlements – or even risk losing the property. So while you might be tempted to forgo owner’s title insurance to save money at closing, take time to consider whether or not the short-term savings are worth the future risk.
FAQs: Title insurance costs and fees
Are there any recurring fees?
No. Title insurance is a one-time premium, paid at closing. It covers you for as long as you or your heirs own the property. There are no ongoing payments, renewals, or deductibles.
Can you shop around for title insurance?
Yes – and you should. Many buyers don’t realize they have the right to choose their own title insurance company, even if their lender recommends one. Shopping around can lead to better pricing or bundled discounts.
How can I save on the cost of title insurance?
- Shop around: You can choose your own title company, even if your lender recommends one.
- Ask for a reissue rate: If the seller recently purchased title insurance, you might qualify for a discounted premium.
- Bundle policies: Buying both lender’s and owner’s policies from the same provider may lower your overall cost.
Do I need title insurance even if I’m buying a new construction home?
Yes, you’ll likely be required to purchase the lender’s title insurance if you are financing your new construction home. You should strongly consider an owner’s title insurance policy, too. Even new construction can have title issues – such as problems with the land deed, unpaid contractors, or prior ownership disputes.
How long does title insurance coverage last?
The owner’s policy lasts for as long as you or your heirs own the property. The lender’s policy remains in effect until the mortgage is paid off.
Can I buy title insurance after closing?
Technically, yes – you can purchase owner’s title insurance after closing, but it’s not usually recommended. For the best protection and pricing, it’s strongly advised to purchase owner’s title insurance at the time of closing. That way, you’re covered from day one and avoid gaps in protection.
Is title insurance included in closing costs?
Yes, title insurance is typically included in your closing costs. Both the lender’s policy and owner’s policy are usually itemized on your Closing Disclosure (CD) or settlement statement, so you can see exactly how much you’re paying and who is responsible for each cost.
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