What You Need to Know About Title Insurance

If you take out a traditional loan, you are going to be required to buy title insurance for at least the value of the loan. It’s a good idea to take out a policy that includes the value of your down payment as well. Like many things regarding real estate, title insurance varies from state to state. In many states, it’ customary for the seller to purchase the title insurance policy to assure a clean title is conveyed at closing. In other states, it’s the responsibility of the buyer. If you’re not sure, ask your real estate professional which is customary.

© karelnoppe - Fotolia.com

© karelnoppe – Fotolia.com

The Title Search

Between the time that your offer is accepted and when the deal closes, the title insurance company will perform a search of public records to make sure clean title can be delivered at closing. Approximately one-third of all searches reveal a small problem with the title that the title expert is able to correct before closing. For example, the current owner may have had minor construction done on the property but never fully paid the contractor. Or property taxes may not be paid up to date. Other common issues include:

  • Errors or omissions in deeds
  • Liens
  • Mistakes in examining records
  • Forgery
  • Undisclosed heirs

Two Types of Policies

One is the owner’s policy. This policy covers the full purchase price of the home and is the most common. The other is a loan policy. It only covers the amount of the loan. This is the minimum policy your lender will allow. It does not cover any money you have directly invested in the home. Before closing the deal, be sure you understand which type of title insurance policy you have.

Ask for a Discount

There is no set fee for title insurance. If you are paying the premium, you want to shop around for the best terms. You don’t necessarily want the cheapest premium. You also want to be sure the title insurance company you go with is financially stable and able to pay in the event a problem develops in future years.

If you are refinancing, your lender (whether the same lender or a new lender) is going to require you to take out a new title insurance policy. This is a time that you want to go with a loan policy that costs less and only covers the outstanding loan. As the homeowner, the original policy covers you and your heirs as long as you have an interest in the property.

Also, if the current owner’s policy isn’t very old, you want to ask their title company for a discount since they have recently researched the title and won’t have to go back in time as far with a new search.

Some people become confused about why they need title insurance on new construction since no one has ever owned a home on the property before. Title insurance covers both the cost of the house and the value of the land it is built on. Someone has almost certainly held title to the land before you acquired it. However, since they don’t need to research for construction liens and other possible problems associated with the building, you should be able to negotiate a discounted premium for new construction.

If you have questions about your title insurance, be sure to ask either your insurance representative or your real estate agent.

PhotoBrian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.


  1. In Florida title insurance is regulated by the Dept of Insurance and rates are promulgated based on purchase price for the Owner’s
    Title Policy at closing. Simultaneous issue charge may apply when pmm financing is involved. On refinance transactions, the owner’s title policy is always honored at time of closing for a reissue credit to be applied towards Lender ‘s new policy premium, as long as the insured owner is still vested in property.

  2. Please note that in the State of Texas the title insurance premium is regulated by the Texas Department of Insurance, we can not give a discount. If you are refinancing your home within seven years of your last transaction (purchase money lien) then you are able to obtain an R8 credit, which is regulated by the Texas Department of Insurance as well.

    • Brian Kline says:

      Thanks for commenting. Maybe you can say more about the R8 credit. The Texas real estate market is very active. I think other readers would be interested.

  3. Dwayne Rudisill says:

    Good article however in many states you cannot request a discount. In the State of Oregon all Title Companies are regulated by the State Insurance Commission and the rates are set in stone and all title companies adhere to those rates or risk being fined by the commission. There are some filed discounted rates built in to our rating manual such as a short term rate. You receive a 25% discount if the property has been insured by any title company in the past 3 years. There are also other reduced rates such as a builders rate etc. but again these are all regulated by the state.
    Dwayne Rudisill
    Vice President
    Regional Title Operations Manager
    First American Title Company
    Jackson and Josephine Counties, Oregon

    • Brian Kline says:

      Hi Dwayne,
      I appreciate your comment. I’m sure you know much more about the subject than I do. If you can elaborate, I’m sure others will appreciate it.


  4. In many states, such as New York, title insurance premiums are requlated and they can not be negotiated

  5. Krissy Whittington says:

    Rates for Title Insurance in Texas are set by Texas Department of Insurance. Shopping Title Companies will do you no go here.

    • Brian Kline says:

      Krissy, thanks for the comment. The Texas real estate market is huge. Do you have anything else to add?