What Is Title Insurance in Real Estate?

Title insurance protects buyers and lenders against past ownership issues—like unpaid liens, errors in public records, or undisclosed heirs—that could affect a property’s title. It’s a one-time cost at closing and is common in FSBO sales alongside the HUD settlement statement and escrow process.

✅ How Title Insurance Works

  • Title search: public records are checked for liens, judgments, and defects.
  • Commitment: a preliminary report outlines requirements to clear title before closing.
  • Coverage: if a covered issue arises later, the policy pays legal defense and financial losses.

Learn how costs appear on the settlement statement.

🏷️ Owner’s vs. Lender’s Policy

  • Owner’s policy: protects the buyer’s ownership rights. Lasts as long as they own the home.
  • Lender’s policy: protects the mortgage company’s interest. Required for financed purchases.

In many states, the seller provides the owner’s policy in FSBO transactions. Check your local custom.

📍 Title Insurance for FSBO Sellers

  • Customary payment: see who pays for title insurance — seller or buyer may pay depending on local custom.
  • Closes risk gaps: protects against claims missed in the title search.
  • Part of closing: issued alongside escrow, deed transfer, and purchase agreement signing.

🧩 Quick Myths About Title Insurance

  • “It’s monthly like homeowners insurance.” ❌ It’s a one-time premium at closing.
  • “It covers future damage.” ❌ It only covers past ownership/title problems.
  • “FSBO sellers don’t need it.” ❌ Buyers and lenders expect title insurance at closing.