Title Insurance FAQs 

Do you have questions about title insurance? Even with some basic knowledge of title insurance, many people still find it confusing. So we’ve put together a list of FAQs that cover things like “what is title insurance?” and “why do I need title insurance?”. Check them out below: 

What is Title Insurance? 

The legal term “title” refers to ownership in property. Title gives you the legal right to possess and use the property. Title insurance is an insurance policy that protects your claim of ownership from title defects that were unknown before the property was purchased.  

A title insurance policy protects your ownership rights from issues such as: 

• Others claiming an ownership interest 
• Improperly recorded documents 
• Fraud 
• Forgery 
• Liens 
• Encroachments 
• Easements  

However, title insurance will not protect you from events that occur after the policy is issued. For example, the policy will not protect you if you do not pay your property taxes and have a tax lien filed against your property.  

Who does Title Insurance Protect?  

A title insurance policy protects the buyer and buyer’s lender from financial losses that occur as a result of a title defect.   

Are there different types of title insurance?  

There are two types of title insurance policies: a lender policy and an owner policy. The difference is that the lender policy protects the lender’s investment and the owner’s policy protects your equity. Let me explain:  

• The lender policy will pay off the balance of your mortgage if a claim against your property voids your title. It will pay up to the amount of principal remaining on the loan.  

• Owner polices protect buyers from certain risks as provided for in the policy. An owner policy only covers you up to the value of the property at the time you bought the policy. If the property increases in value, you will need to buy an increased value endorsement to cover the difference.  

What is the role of the title company?  

The title company’s role is to conduct a title search, issue the title insurance, and defend any policyholders in title disputes.  

A title search starts with an examination of public property records, including deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens, encumbrances, and maps.  

The purpose of the title search is to ensure that the person who claims ownership of the property (i.e. the seller) is the true owner of the property and that there are no outstanding liens or encumbrances that could pass to the buyer at the time of sale.  

The title company will also review the property survey to look for encroachments or easements that could affect ownership. It will also prepare an abstract of title which summarizes the title search findings and attests to the validity of the title.  

Once title is validated, the title company issues a title insurance policy for the property.  

If there is a title dispute, the title company will defend the buyer and/or lender against lawsuits or claims against the property. It will pay you for covered losses up to the amount of your policy if the company loses. 

Do I need title insurance, or am I required to buy it?  

If you are financing the purchase of your home, your lender will require you to purchase a lender’s policy. Buyers may opt to purchase a separate owner’s policy. When purchasing property, you should seriously consider obtaining title insurance as it is relatively inexpensive in comparison to the total investment made in the property.  

Who pays for the title insurance?  

The buyer and seller may negotiate who pays the title insurance premium. It is a one-time payment at the time of closing and is often rolled into your mortgage loan. 

How much does title insurance cost?  

The Texas Department of Insurance sets title insurance rates. The rate is based on the property’s sale value. Title companies, however, may charge additional taxes or fees for their services.  

Still have questions about title insurance?  

A real estate broker can help you with some information regarding title insurance, but only a lawyer can offer legal advice. Tony Malley at Texas Land Brokers is both a broker and real estate lawyer. Contact Texas Land Brokers with any additional questions you may have about title insurance.