• Debbie Ferraro

What Does Title Insurance Cover & How Long Is It Good For?

Updated: Nov 8, 2021

gold key on wooden house-shaped keyring with word INSURANCE on paper

If you’re uncertain about the ins and outs of title insurance, you’re not alone. Almost everyone has heard the term before, but most people only have a vague notion of what it is, how it works, and why it is needed. Complicating matters further is the fact that there are two different types of title insurance, with each working slightly differently. Here’s a quick primer that answers common questions like, “How long is title insurance good for?” and, “Do I really need title insurance?”

What does title insurance cover?

Title insurance is an insurance policy that acts as a safeguard against another party claiming rights to your home or property. When you purchase real estate, its history is carefully examined to ensure that no one else can come forward and claim that they either own or have a stake in the property. If a title defect is missed during this examination and someone claims to be the rightful owner of your home, you could lose thousands of dollars in legal fees, settlements, and even lose your home if the other party has a valid claim. Title insurance provides protection if this ever were to happen.

What are the two types of title insurance?

What is owner's title insurance?

There are two types of title insurance: lender’s policies and owner’s policies. The lender’s policy is the policy that you are required to purchase when you’re buying a home with a mortgage. Banks and mortgage providers will not finance the purchase of property unless a buyer takes out a lender’s title insurance policy, as this protects their interests in case of a title defect.

What is lender's title insurance?

A lender’s policy doesn’t provide protection for you, even though you’re the one purchasing it. This is where owner’s title insurance comes into play. When you take out an owner’s title insurance policy, it protects you from having to pay legal fees and damages, up to your policy limit. Lender’s policies are purchased in order to close on a property purchase, but owner’s title insurance can be purchased at any time, even years later.

How long is title insurance good for?

A lender’s policy is good until your mortgage is completely paid off and your lender no longer has any financial interest in your property. In contrast, owner’s policies last as long as you or your heirs own your home.

Do I really need title insurance?

If you’re purchasing a home with a mortgage, your lender will require you to purchase a lender’s title insurance policy to protect their financial interests, but if you’re purchasing your property in cash, there’s no lender involved and thus no need for a lender’s policy.

You may still wish to purchase an owner’s policy, though, and it’s recommended by most financial experts. While you don’t need such a policy, if someone were to come forward with a claim to your home, it would be financially devastating; owner’s title insurance provides you some insulation from the financial fallout of such a claim.

Where can I get title insurance?

American Guardian Title is a boutique title company that offers personalized service and innovative processes to make getting title insurance a seamless experience. Contact us today for a title insurance quote or to learn more about our services.