Even if you haven’t yet bought a home, chances are you’ve heard about homeowners insurance, which protects you in case of damage or loss to your property. But there’s a lesser-known type of insurance that’s just as important—one that guards your legal right to own your home.
It’s called title insurance, and it protects you against potential problems involving your home’s ownership history—issues that could cost you time, money, or even the home itself. Here’s what you should know and why it matters for every homeowner.
What is Title, Exactly?
In real estate, title refers to your legal right to own, use, sell, or pass down your property. The word derives from centuries-old property law, where ownership was established through written documents proving who had the right to a piece of land.
When you buy a home, you expect the title to your home to be “clear”—that is, no one else can claim ownership or place legal restrictions on it. To ensure this, a title company will perform a title search, which is a detailed review of public records, legal documents, and past transactions to see if there are any claims against the property.
For example, if a previous owner didn’t pay property taxes, contractor bills, child support, or other obligations, a lien could have been placed on the property. A lien is a legal claim that must be settled before the property can be sold with a clear title. If the title company finds a lien, they—often working with the seller and their lender—will work to have it resolved before the sale can proceed.
But even with a thorough search, some problems can slip through and surface months or even years later. If a lien isn’t discovered and resolved before you buy, you could be responsible for paying it, even though you had nothing to do with the debt. That’s where title insurance comes in.
How Title Insurance Works
Unlike most insurance policies that protect against future events, title insurance protects against problems that already exist—but weren’t known when you bought the home.
Your title insurance policy covers the cost of defending your ownership in court and paying any valid claims, if necessary. Common issues it protects against include unpaid property taxes, clerical errors in public records, forgery or fraud involving past ownership documents, unknown heirs who may claim a right to the property, or disputes over boundaries or access rights.
When you buy a home, you’ll need two types of title insurance. There’s the owner’s policy, which protects you, the homebuyer, for as long as you own the property. Who pays for this policy can vary depending on local real estate customs. Sometimes the buyer pays for it, and sometimes the seller does—but it’s the buyer’s responsibility to obtain this coverage.
The lender’s policy protects your mortgage lender’s interest in the property until the loan is paid off. Most lenders require this policy, and the buyer typically pays for it as part of closing costs. However, many title companies offer a discounted rate when both policies are bought together.
The good news is that title insurance is a one-time cost that can save you from big headaches later. Unlike other types of insurance, there are no ongoing premiums—and you’re covered for as long as you own your home.
The Bottom Line
A home is one of the largest purchases you’ll ever make. Title insurance helps protect that investment by ensuring your ownership is secure from hidden legal risks. It also ensures that if a claim arises, you have a team of professionals ready to defend your rights and cover potential financial loss.
At Right By You Mortgage, we work with trusted title professionals to make sure you’re protected from day one—so you can enjoy your new home with confidence.
Have more questions about title insurance or the home buying process? The local loan experts at Right By You Mortgage can help. Find a loan officer near you or send us an email at inquiries@rightbyyoumortgage.com to get started.
