Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
Full Definition
Title insurance is a form of indemnity insurance protecting buyers and lenders against financial loss from defects in a property's title that existed prior to the purchase but were undiscovered at closing. There are two types: owner's title insurance (protects the buyer's equity) and lender's title insurance (required by most lenders, protecting the loan amount). Unlike other insurance that protects against future risks, title insurance protects against past events — hidden defects such as forged deeds, undisclosed heirs, errors in public records, missing signatures, undisclosed liens, or boundary disputes. Title insurance is a one-time premium paid at closing. The owner's policy protects for as long as the insured or their heirs hold title.
Real-World Example
After closing, a buyer discovers a previously unknown judgment lien from the seller's old creditor. The buyer's title insurance policy pays the claim, protecting the buyer's equity.
How Title Insurance Appears on the Real Estate Exam
Common question types, tested concepts, and what to watch out for
Owner's policy protects the buyer; lender's policy protects the lender. The lender's policy does NOT protect the buyer — both should be purchased. Title insurance covers claims from the PAST, not future events.
Related Terms
More Title & Ownership Terms
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