Quick Answer
An owner's title insurance policy protects the insured owner's interest against certain covered title defects that generally originate before the policy date, up to the policy amount. It also covers the cost of legal defense against covered claims.
If you are buying a home, you will likely be offered an owner's title insurance policy. Understanding what it covers, and what it does not cover, helps you decide whether to purchase it.
Examples of Covered Issues
An owner's policy typically covers financial loss from title defects such as:
- Someone else claiming ownership through an unknown heir or prior document
- Forged signatures on deeds or other documents in the chain of title
- Improper or missing signatures on prior documents
- Documents that were not properly recorded, notarized, or delivered
- Undisclosed easements or restrictive covenants affecting the property
- Liens or encumbrances that were not properly released
- Mistakes in public records affecting your ownership
- Incorrect legal descriptions in prior deeds
These are risks that existed before you purchased the policy but were not discovered during the title search.
What Is Not Automatically Covered
An owner's policy does have limitations. Standard exclusions often include:
- Defects, liens, or encumbrances you created or agreed to
- Issues that arise after the policy date (unless specifically endorsed)
- Zoning violations or restrictions that are not in the public record
- Environmental hazards or violations
- Boundary disputes or survey issues (may be covered with endorsements)
- Matters created by or known to you but not disclosed to the insurer
Always read your policy and ask your title company about what is and is not covered in your specific transaction. The title commitment gives a preview of what the policy will cover.
Why the Lender's Policy Is Not Enough
Some buyers assume that because the lender is getting title insurance, their ownership is also protected. That is not correct. A lender's policy protects the lender's loan, not the buyer's equity. If a title problem arises, the lender gets paid first, and you could lose your investment. Our comparison of owner's vs. lender's title insurance explains this in detail.
How Much Protection Does It Provide?
The policy covers you up to the purchase price of the property (or the policy amount). If you later sell at a higher value, some policies offer inflation protection or you can purchase increased coverage. The policy also covers the cost of legal defense against covered claims, which can be substantial even on its own.
Why Problems Appear After a Search
Even the most thorough title search cannot guarantee that every problem is found. Records may be incomplete, documents may be stored in the wrong county, or heirs may not have come forward yet. Title insurance exists precisely because some problems cannot be discovered through searching alone.
Key Takeaway
An owner's title insurance policy protects your investment against hidden title defects that originated before you bought the property. It covers financial loss and legal defense costs for covered claims, subject to the policy's terms, conditions, and exclusions.
FAQs
Does owner's title insurance cover title defects I cause?
No. The policy covers defects that existed before the policy date, not defects you create after closing. Standard policies exclude matters created by or known to the insured.
Is owner's title insurance transferable if I sell?
Typically no. The policy covers your ownership interest. When you sell, the new buyer would need their own policy. However, some policies offer reissue rates or limited coverage for warranty claims.
Can I buy owner's title insurance after closing?
In some cases, yes, but it is almost always more expensive and may have more restrictive terms than purchasing it at closing.