What First-Time Buyers Should Know About Title Insurance

If you are buying your first home, you have probably seen a line item for title insurance on your estimate and wondered what it actually buys you. It is one of the least understood parts of a closing, and also one of the most important. Here is the plain-English version.

What title insurance protects

When you buy a home, you are buying its history along with its walls. Title insurance protects your right to own the property against problems that happened before you ever signed a contract: an unpaid contractor's lien, a forged signature in a past sale, an unknown heir with a claim, or a simple clerical error in the public record. If one of those surfaces after you close, your policy defends your ownership and covers a covered loss.

Owner's policy versus lender's policy

There are two policies, and they protect two different people. The lender's policy protects the bank's investment in your loan, and lenders almost always require it. The owner's policy protects you and your equity. Only the owner's policy protects your investment, and it is a one-time cost at closing that lasts for as long as you own the home.

What you actually pay

Unlike car or health insurance, title insurance has no monthly premium. You pay once, at closing, and the coverage does not expire while you own the property. In many Arizona transactions the seller pays for the owner's policy and the buyer pays for the lender's policy, but this is negotiable and spelled out in your purchase agreement.

The bottom line

Title insurance is quiet protection you hope you never need. For a one-time cost, it stands between you and someone else's old mistake. If you are closing soon and want a clear walk-through of your specific policy, our team is always glad to explain it in plain English.