What Is a Title Insurance Policy in Real Estate?
A title insurance policy is the official document that confirms title insurance coverage on a property. It’s issued after a title search and title commitment are completed, and it details what is covered, excluded, and insured in the transaction. When you buy or sell real estate, the title insurance policy serves as written proof that ownership rights are protected from past title defects.
What Does a Title Insurance Policy Cover?
A title insurance policy protects property owners and lenders from financial loss caused by title issues that weren’t discovered before closing. It can cover problems such as:
- Liens, unpaid taxes, or undisclosed encumbrances
- Errors in public records or recording mistakes
- Fraud, forgery, or undisclosed heirs
- Boundary disputes or ownership conflicts
Unlike most insurance policies that protect against future risks, a title insurance policy covers past issues that could affect ownership. It’s directly tied to title insurance — the policy is the contract, and title insurance is the protection itself.
Owner’s Title Insurance Policy vs. Lender’s Policy
In most closings, two types of title insurance policies are issued:
- Owner’s Policy: Protects the buyer’s ownership rights for as long as they own the property.
- Lender’s Policy: Protects the mortgage lender’s financial interest until the loan is paid off.
If you’re selling FSBO, the buyer’s title company typically issues both. Depending on state law, buyers and sellers can negotiate who pays for the owner’s policy.
When Is a Title Insurance Policy Issued?
A title insurance policy is typically issued after the conveyance of title is complete and the deed is recorded in county records. At that point, the title company finalizes the terms based on the title commitment and provides copies to the buyer and lender. Each policy specifies the coverage amount (usually equal to the purchase price or loan value) and any exceptions or endorsements.
Why Title Insurance Policies Matter
A title insurance policy ensures that your title is clear and legally defensible. If a past defect surfaces after closing, your title insurer provides legal defense and covers losses up to the policy’s insured amount. Understanding your policy helps protect your equity and prevents future ownership disputes.
Related Title Concepts
- Title Insurance – the protection against title defects.
- Title Commitment – the preliminary document outlining terms before issuing the policy.
- Title Search – the investigation that verifies ownership and liens.
- Conveyance of Title – the act of transferring ownership legally.
Frequently Asked Questions About Title Insurance Policies
Is a title insurance policy the same as title insurance?
They’re related but not identical. Title insurance is the protection, while the title insurance policy is the official document describing the coverage, exclusions, and terms.
Do I need both an owner’s and a lender’s title insurance policy?
Yes. The owner’s policy protects your ownership rights, and the lender’s policy protects your lender’s interest until the mortgage is paid off.
When do I receive my title insurance policy?
After closing, once the deed is recorded and the title insurer finalizes your coverage based on the title commitment, your title insurance policy is issued.