Title insurance protects against a loss to the lender or the owner in the event that the title to the property is other than as insured. Title insurance is an essential part of virtually every transfer of ownership of residential or commercial real estate. It is purchased at settlement, and the title insurance policies are issued shortly thereafter. Although it can be one of the higher costs of closing, buyers should be aware that it protects them against potentially disastrous losses.

There are two (2) types of title insurance policies: lender's and owner's. Lender's title insurance is required by lenders to protect their interest in the property from possible title defects. Buyers have the option of purchasing owner's title insurance to protect the buyer's investment, which often is greater than the loan on the property. While the lender's policy expires when the loan is paid off, the owner's policy coverage can continue as long as the owner has a vested interest in the property (and depending upon the type of owner's coverage purchased, even longer).

With both owner's and lender's title insurance, there are essentially two (2) levels of coverage, Basic and Enhanced. Some lenders require their coverage to be at the Enhanced level; others only require Basic coverage. Owners can elect whether to obtain Basic or Enhanced coverage, or none at all. Click here for a comparison of Basic and Enhanced owner's coverages courtesy of First American Title Insurance Company. Enhanced coverage (Eagle) is approximately 20% more expensive than Basic (ALTA) but you will see that it covers significantly more risks.

It is important to know that title insurance premiums are paid only once, at the closing. Owners title insurance may be purchased after the closing, but only after another full title search is undertaken and any necessary affidavits are executed.