Title insurance protects against title defects discovered after closing — such as unknown liens, forged deeds, undisclosed heirs, survey errors, or previous ownership disputes. Unlike other insurance (which covers future events), title insurance covers past events that could affect ownership.
Two types:
- Owner's policy: Protects the buyer's equity — one-time premium at closing, coverage lasts as long as you own the property
- Lender's policy: Required by virtually all mortgage lenders, protects the lender's loan amount
Cost is typically 0.5–1.0% of purchase price and varies by state. Title insurance is strongly recommended (often required) for all investment property purchases.
Related Terms
LTV
Loan-to-Value — loan amount as a percentage of the property's appraised value.
Due Diligence
The investigation process a buyer performs before closing — inspections, financials, leases, title, and legal review.
Escrow
A neutral third-party account holding funds and documents during a real estate transaction until all conditions are met.