Title insurance: why it’s important and what it actually covers

Written by Samantha SheltonNMLS 1647301Updated October 2026

Title insurance protects you from financial loss caused by ownership problems that already existed when you bought the home but weren’t discovered in the title search, unpaid liens, forged signatures, clerical errors in the public record, boundary disputes, and unknown heirs. Two separate policies are in play at almost every financed closing: the lender’s policy your mortgage company requires, which protects only their loan balance, and the owner’s policy, which is optional in most states and protects your equity for as long as you own the property.

Unlike homeowners insurance, you pay for it once at closing, and it covers backward in time rather than forward. No renewals, no monthly premium.

Learn why title insurance is important, including what each policy covers, what a real claim looks like, and which title fees you can shop. If you’re earlier in the process, start with our Home Buying guide.

Key takeaways:

• The lender’s policy protects your lender, not you: Of the 2 policies in play at a typical closing, only the owner’s policy defends your equity.
• You pay one premium, one time: An owner’s policy is 1 premium paid at closing, and it lasts as long as you own the home.
• Coverage looks backward, not forward: It pays legal defense and losses from liens, forgeries, recording errors, and unknown heirs that predate your purchase, and title work is shoppable, so comparing 2 to 3 companies changes your cash to close.

What is title insurance, and how is it different from homeowners insurance?

Title insurance is a one-time policy that pays your legal defense costs and your losses if someone claims an interest in your property based on something that happened before you bought it. Homeowners insurance covers the house. Title insurance covers your right to own it.

The difference is direction. Homeowners insurance looks forward, paying for the fire after closing. Title insurance looks backward, paying for a defect in the chain of ownership that existed the day you signed.

That design is why a policy is issued only after a title search of the public record, deeds, mortgages, liens, judgments, probate filings. But the record is incomplete by nature: a forged signature looks like a real one, and an unknown heir leaves no record at all. Title insurance is the backstop for what the search can’t see. The CFPB explains owner’s title insurance in plain terms, and our home buying process guide shows where the search lands.

Lender’s policy vs. owner’s policy: which one actually protects you?

The lender’s policy protects your lender, not you. The Consumer Financial Protection Bureau states it plainly: lender’s title insurance “only protects the lender against problems with the title” and does not protect your investment in the home, your equity. It’s usually required to get a mortgage. The owner’s policy is optional, and it’s the only one of the two that defends the money you put in.

If a covered claim takes your ownership and you carried only the lender’s policy, the insurer pays off the mortgage and your lender walks away whole. Your down payment, your equity, and your attorney’s bills are yours. That asymmetry is the whole argument for the owner’s policy.

What does title insurance cover, and what does it not?

A standard owner’s policy covers five recurring categories of defect, plus the cost of defending your title in court even when the claim fails, often the more valuable half.

• Unpaid liens and judgments: A contractor’s lien, a tax lien, or an unreleased second mortgage attaches to the property, not the person.
• Fraud and forgery: A deed signed by someone impersonating the owner, or a forged mortgage release, can break the chain of ownership.
• Errors in the public record: A misspelled name, a wrong parcel number, or a legal description covering the neighbor’s lot creates a defect nobody catches for years.
• Unknown or missing heirs: When an estate was settled without every heir, the omitted heir can surface with a claim to the property.
• Undisclosed easements: A recorded easement running through the spot you planned to build on limits what you can do with the land.

What title insurance does not cover

Standard policies exclude anything you create after closing, a lien from your own unpaid contractor, for example, and typically exclude zoning violations, environmental contamination, unrecorded easements, and boundary discrepancies a current survey would have revealed.¹ Endorsements close many of those gaps by extending the policy to a specific risk; the ALTA 49 and 49.1 endorsements address losses from deed fraud, forgery, and seller impersonation, and the American Land Title Association’s consumer resources explain how they work. Coverage also stops at ownership: condition problems live in your inspection and the seller’s disclosures, not the title commitment.

Three title claims that show why the owner’s policy matters

All three share one shape: the defect predated closing, nobody found it, and the bill arrived years later.

An unreleased contractor lien

The seller disputed a roofing invoice two years before listing, and the mechanic’s lien was never released. It stays attached to the property, not the seller without an owner’s policy, you pay it or fight it.

An unknown heir contests the deed

An estate settled a decade ago, the home sold twice, and a child from a prior marriage surfaces with a documented claim. A claim against the chain of ownership is a claim against you, one reason buying a foreclosed home deserves extra title scrutiny.

A recording error in the legal description

A clerk transposed two digits in a 1994 legal description, and every deed since copied it forward. You find out when a buyer’s title company won’t insure a parcel whose boundaries don’t match the survey, and your policy funds the quiet title action.

How much does title insurance cost, and which title fees can you shop?

Title insurance is a single premium at closing, not an ongoing cost, and pricing varies by state and purchase price, some states regulate title rates, others let companies compete. That variation is why the shopping rules matter more than any national average.

Federal rules split closing costs into services you can shop for and services you can’t. On the Loan Estimate, the shoppable items sit under “Services You Can Shop For,” and every title-related item begins with the word “Title” so you can spot them. Your lender must also hand you a written list of providers: pick from it and those charges can’t exceed the estimate by more than 10%; shop outside it and no tolerance applies.

• Compare the fees, not just the premium: Settlement fees, title search fees, and endorsement charges vary between companies even where the insurance rate doesn’t.
• Ask for the simultaneous-issue rate: Buying both policies from one company typically costs less than buying them separately, per the CFPB, which also notes you can usually shop title separately from your mortgage.

On the Closing Disclosure, title charges land in “Services Borrower Did Shop For,” an optional owner’s policy appears under “Other” with the word “optional” in its label, and recording fees and transfer taxes sit in “Taxes and Other Government Fees.” You get it no later than three business days before closing, your window to compare it against the Loan Estimate. See the CFPB explainer on where title fees appear on your Closing Disclosure, plus our guides to closing-cost budgeting, choosing a title company, and escrow.

How often do title claims happen, and what does the premium pay for?

Claims are a small share of what title insurers collect. According to the American Land Title Association, the industry wrote $16.2 billion in title premiums in 2024, 7% more than in 2023, and paid more than $676 million in claims that year, up from $638 million in 2023, per its May 15, 2025 premium volume release.

Source: American Land Title Association, title premium volume release, May 15, 2025.

The Government Accountability Office reported the same pattern in its 2007 review of the industry, GAO-07-401: in 2005, losses and loss adjustment expenses came to about 5% of the total premiums title insurers wrote, while about 70% was paid to or kept by title agents, mainly for title search and examination work and for commissions. For comparison, the same report put property-casualty insurers’ losses and loss adjustment expenses at about 73% of their written premiums that year. GAO also found that agents typically keep 80% to 90% of the premium a consumer pays on the policies they write, and that the 2005 industry share was lower because insurers also sell policies directly, with no agent involved. When the search does turn up a lien, our guide to selling a home with a lien covers how the seller clears it.

State regulators keep working on how buyers compare that cost. The National Association of Insurance Commissioners’ Title Insurance (C) Working Group lists among its current charges updating the Title Insurance Consumer Shopping Tool Template and tracking consumer complaints submitted to states about title insurance, according to the working group’s page.

How do seller impersonation and deed fraud threaten a title?

Seller impersonation fraud is forgery aimed at the sale itself: someone poses as the owner of a property they do not own and tries to sell it. ALTA’s 2026 Critical Issues study, which surveyed 245 title professionals in spring 2026, found that 59% of firms reported at least one seller impersonation attempt in the prior calendar year, up from 28% in its 2024 study. The share reporting an attempt in the prior month rose from 19% to 45%. One in four firms that reported an attempt also reported a paid claim tied to it, and half of the firms that disclosed average claim costs put them above $100,000, according to ALTA’s seller impersonation fraud study.

The earlier survey shows which properties draw the attempts. Among 783 title companies responding in 2024, the property types named as targets were led by vacant land (85%), followed by vacation homes (37%), rental properties (37%) and agricultural land (23%), per ALTA’s July 30, 2024 summary. If you are buying land or a second home from a seller you have not met, ask the title company how it confirms the seller’s identity before closing, and see our real estate due diligence guide for the rest of the checks.

The FBI tracks a broader category. Its Internet Crime Complaint Center counts real estate fraud as loss of funds from a real estate investment or fraud involving rental or timeshare property, so its totals include more than deed and closing fraud. Reported losses in that category rose to $275,110,419 in 2025, according to the FBI’s 2025 Internet Crime Report:

Source: FBI Internet Crime Complaint Center, 2025 Internet Crime Report, three-year crime type tables. ALTA summarized the same rise in an April 10, 2026 release.

The same 2025 report shows who carries the losses. Complainants aged 60 and over filed 2,473 real estate complaints nationally in 2025, with $123,671,936 in reported losses.

How do you keep your closing funds away from wire fraud?

The FBI’s 2025 Internet Crime Report describes a March 2025 case in which a senior closing on a Missouri property received a compromised email, presented as coming from the title company, with wire instructions for more than $1.3 million to a fraudulent account. The Bureau’s Recovery Asset Team worked with banks to freeze the receiving account. The Consumer Financial Protection Bureau’s checklist for protecting closing funds lays out the steps a buyer controls:

• Pick two trusted contacts early: Your agent and your settlement agent, for example. Talk through the closing and the money transfer with them in person or by phone, and write down their names and numbers.
• Agree on a code phrase: One that only you and those contacts know, so you can confirm who is on the other end later.
• Never follow wiring instructions from an email: Confirm the account name and number by calling the number you already wrote down, not one printed in the message.
• Keep financial details out of email: Do not send account information by email, and do not trust links or attachments in a message about your closing until you have confirmed it.
• Move fast if money goes astray: Call your bank or wire transfer company right away and ask for a wire recall, then file a complaint with the FBI’s Internet Crime Complaint Center.

The CFPB page dates from June 3, 2019 and is now archived, so ask your settlement agent at the start how it handles incoming funds and which phone number it will use to confirm them.

Why does the owner’s policy on a Loan Estimate look different from the title company’s quote?

Federal disclosure rules place the simultaneous-issue discount on the owner’s line, not the lender’s. Under the official interpretation of Regulation Z, comment 37(g)(4)-2, the Loan Estimate shows the lender’s policy at its full premium. The owner’s policy is shown as the full owner’s premium, plus the simultaneous-issue premium for the lender’s coverage, minus the full lender’s premium. The Closing Disclosure uses the same arithmetic under comment 38(g)(4)-2.

Hypothetical example, not an offer. Suppose a title company’s rate card shows a full owner’s premium of $1,000, a full lender’s premium of $700, and a simultaneous-issue lender’s premium of $200 when both policies are issued together.

Source: calculation method from Regulation Z comment 37(g)(4)-2; the dollar figures are hypothetical.

The combined total does not change; the split does. In a Michigan purchase where the seller pays for the owner’s policy by custom, that method decides which side of the Closing Disclosure carries the discount, since the borrower-paid lender’s line is disclosed at the full lender’s premium. The same comment 38(g)(4)-2 requires the parenthetical “(optional)” at the end of the owner’s policy label when the policy is designated borrower-paid, so a seller-paid owner’s policy can appear without that word. If a line does not match a quote, ask the settlement agent to show both calculations. Our guide to seller-paid closing costs covers how those credits work, and the Loan Estimate check reads the rest of the form.

What does Fannie Mae require the lender’s policy to cover?

For the loans it buys, Fannie Mae’s Selling Guide, section B7-2-03, says the amount of title insurance coverage must at least equal the original principal amount of the loan. The policy must confirm that the title is generally acceptable and that the mortgage holds the required lien priority, and it must list all other liens and state that they are subordinate to Fannie Mae’s mortgage lien. Loans originated on or after January 1, 2024 must be written on the 2021 ALTA Loan Policy or an equivalent ALTA short form, or, in a state whose law does not use ALTA forms, on the state-promulgated form; earlier loans could use the 2006 or 2021 form. Those requirements are why the lender’s policy is sized to the loan amount rather than to the purchase price.

What Michigan buyers should know

Michigan custom splits the two policies between the two parties, which surprises buyers who assume the owner’s policy is theirs to buy.

• The seller customarily buys the more valuable of the two policies: In Michigan, the seller traditionally furnishes and pays for the owner’s policy, while the buyer pays for the lender’s policy their mortgage requires. It’s custom, not law, confirm it in your purchase agreement.²
• Two documents get recorded, each with its own fee: Your deed and your mortgage are recorded separately at the county register of deeds, and Michigan’s state and county transfer taxes, customarily a seller cost, are collected then too, under “Taxes and Other Government Fees” rather than your title fees.
• Use your three-day window: Because the Closing Disclosure arrives at least three business days before closing, you have time to confirm the owner’s policy is on the form and charged to the party your contract names.

Waterford and Oakland County see plenty of estate sales, land contracts, and long-held family properties, the transactions where an old lien or an unsettled estate turns up in the title work. Our guide to the home closing process maps the sequence.

What Michigan laws and county offices help protect your title?

Michigan raised the penalty for deed fraud in 2024. Public Act 154 of 2024, effective April 2, 2025, amended MCL 565.371: knowingly drafting or submitting a document for recording with a register of deeds, with intent to defraud the owner of real estate or of an interest in it, is a felony punishable by up to 10 years in prison, a fine of up to $5,000, or both. Recording a conveyance with intent to deceive carries up to 3 years. A register of deeds who believes a document was submitted in violation may give the evidence to the county prosecutor.

The Senate Fiscal Agency’s October 10, 2024 analysis of the bill cites testimony of more than 13,000 inquiries about this kind of fraud in Wayne County since 2005. Wayne County Register of Deeds Bernard Youngblood told BridgeDetroit in June 2024 that the county’s Mortgage and Deed Fraud Unit had opened 2,300 cases since 2005, producing 347 convictions, with about 400 complaints open. He also said the register of deeds does not notify the assessor after a transfer, so that step falls on the owner, as BridgeDetroit reported. If the home you are buying passed through an estate, our guide to selling a home in probate shows what the seller’s side involves.

Some Michigan counties let owners watch their own record. Oakland County’s Clerk and Register of Deeds launched a notification system in 2015 that emails owners when a document bearing their name is filed, searchable by address, parcel identification number or name, as WDET reported at launch. The county’s official blog called the Property Records Notification service free in June 2016 and named ocmideeds.com as the place to sign up, per Oakland County’s announcement, and WXYZ reported on a resident who signed up for the county’s free email alerts; the same report points owners to ocmideeds.com to search an address for recent records.

The Department of Insurance and Financial Services (DIFS) licenses title agencies and acts against them. In July 2025 it summarily suspended two Michigan title agencies after consumers who had deposited funds into their escrow accounts received notices that taxes, utilities and liens had not been paid, and it advised buyers to watch those payments come due and to check with the county register that every document in their transaction was filed, according to the DIFS release. In 2021 it ordered a company that posed as a Michigan title insurer, selling fraudulent policies online without a license, to stop after a buyer questioned wire requests totaling nearly $150,000 in November 2020; the company faced up to $50,000 in fines, per the department.

Which Michigan government fees appear beside your title charges?

The register of deeds charges a flat $30.00 to record a document regardless of page count, and $5.00 of each recording fee goes to the automation fund under section 2568, under MCL 600.2567 as amended effective October 1, 2016. Transfer tax is separate. The state rate is $3.75 for each $500 or fraction of $500 of the property’s total value under MCL 207.525, the county rate is 55 cents per $500 in a county of fewer than 2,000,000 people under MCL 207.504, and the State Real Estate Transfer Tax Act makes the seller or grantor liable for the state tax under MCL 207.523. A seller may owe no state tax: MCL 207.526(u) exempts a sale of a home on which the seller claims the principal residence exemption when its state equalized value is no higher than it was when the seller acquired it and the price was set at arm’s length, and a seller, or a buyer who paid the tax for the seller, who believes the sale qualified may ask the Department of Treasury for a refund.

Hypothetical example, not an offer. On a $300,000 sale with a deed and one mortgage recorded, where the seller does not qualify for that exemption:

Source: rates from MCL 207.525, MCL 207.504 and MCL 600.2567; the sale price is hypothetical.

Our guide to sellers’ closing costs shows where these taxes fit in a seller’s other costs, and the seller net sheet calculator figures both taxes from a sale price.

FAQ: Title insurance for home buyers

Here are answers to common questions about title insurance.

Is owner’s title insurance required?

No. Your lender will require a lender’s policy, but the owner’s policy is optional in most states and is disclosed as optional on your Closing Disclosure. It is still widely recommended: without it, a successful claim against your title leaves the lender made whole while you absorb the loss of your down payment and equity plus your own legal defense costs.

What does title insurance not cover?

Standard policies exclude problems that arise after closing, such as a lien you create yourself, and typically exclude zoning violations, environmental issues, unrecorded easements, and boundary discrepancies a survey would reveal. Many can be covered by endorsements. Read the exceptions schedule in your title commitment and ask the title company to explain each one, our explainer on conveyance in real estate covers deeds.

How much does title insurance cost?

Pricing varies by state and purchase price, and some states regulate the rate while others let companies compete. It is a single premium at closing, not an ongoing cost. Because certain title and settlement services are shoppable under federal rules, comparing two or three title companies can meaningfully change your cash to close. See our breakdown of closing costs.

Does title insurance transfer to a new owner?

No. An owner’s policy covers the named insured for as long as they own the property and generally extends to heirs, but it does not pass to a buyer, the new owner buys their own. If you refinance, your lender typically requires a new lender’s policy, though many title companies offer a reissue discount when the prior policy is recent. See preparing for a home closing.

Can a seller require me to use a particular title company?

Not as a condition of the sale when you are buying with a federally related mortgage loan. Section 9 of the Real Estate Settlement Procedures Act, 12 U.S.C. 2608, bars a seller from requiring, directly or indirectly, that the buyer purchase title insurance from a particular title company. A seller who violates it is liable to the buyer for three times all charges made for that title insurance.

Can a lender skip lender’s title insurance on a refinance?

Only in a limited test. In March 2024 the Federal Housing Finance Agency approved a small, limited-duration Fannie Mae pilot that removes the lender’s title policy or attorney opinion letter requirement on certain refinances with loan-to-value ratios under 80%, for participating lenders in select areas. FHFA estimated savings of $500 to $1,500, and homeowners may still buy their own policy, per its pilot FAQ. See refinancing closing costs.

Is the owner’s policy on my Loan Estimate the basic or the enhanced one?

Usually the basic one. The official interpretation of Regulation Z, comment 37(g)(4)-1, says the owner’s premium on the Loan Estimate is based on a basic owner’s policy rate, not an enhanced policy, unless the sales contract requires the enhanced policy and the lender knows that when it issues the estimate. If you want broader coverage, ask the title company to quote both forms before closing.

How do I check that a Michigan title agency is licensed?

Search the DIFS Agency Locator, which the state insurance department points buyers to for confirming that a title agency holds an active license, and look up the mortgage company and loan originator on NMLS Consumer Access. DIFS also suggests being cautious when a company contacted you first. If something looks wrong, file a DIFS complaint.

What is Michigan’s Marketable Record Title Act?

It is a 1945 Michigan law, MCL 565.101, under which a person with an unbroken chain of record title to an interest in land for 40 years, or 20 years for mineral interests, is considered to have marketable record title at the end of that period. It does not apply when the land is in another person’s hostile possession. The Legislature has amended it since, most recently in 2018, 2024 and 2025.

The bottom line on title insurance

Title insurance is important because it covers backward, not forward: it pays your legal defense and your losses when an ownership problem that predates your purchase, a lien, a forgery, a recording error, an unknown heir, surfaces after you own the home. Two policies are in play at almost every closing, and only one is yours. The lender’s policy is usually required and stops at the loan balance; the owner’s policy is optional in most states, costs one premium at closing, and lasts as long as you own the home. Title work is shoppable, so comparing companies is real money.

If you’re ready to buy and want your title and closing fees read alongside your financing, talk to Align Lending. We’ll shop your scenario across our lender network and show you the numbers side by side. Call 248-506-5727 or start online.

Footnotes:

1. Coverage described here is general. What any individual policy covers is defined by the policy form itself, the schedule of exceptions in your title commitment, and any endorsements issued at closing. Exclusions, exceptions, and available endorsements vary by insurer and by state. Review your commitment with your title company or a licensed real estate attorney before closing. Return to text.

2. Who pays for the owner’s policy, the lender’s policy, and transfer taxes in Michigan is a matter of local custom and contract, not a fixed rule, and it varies by county and by transaction. The allocation is negotiated in the purchase agreement and reflected on the Closing Disclosure. Align Lending does not set title rates or select your title company. Return to text.

Sources: lender’s title insurance usually required to get a mortgage loan, the lender’s policy protecting only the lender and not the buyer’s equity, the owner’s policy protecting the buyer’s financial investment, the ability to shop for a title provider separately from the mortgage, and lower cost when both policies are bought from the same provider, Consumer Financial Protection Bureau, “What is title insurance? Do I need title insurance?” and “What is owner’s title insurance?”, “Services You Can Shop For” heading and the “Title” label prefix for title-related items on the Loan Estimate, 12 CFR § 1026.37(f)(3) and (f)(3)(i). “(optional)” parenthetical required at the end of labels for premiums paid for separate insurance products, 12 CFR § 1026.37(g)(4) and § 1026.38(g)(4). Written list of settlement service providers, the 10 percent cumulative tolerance, and the absence of a tolerance limit when the consumer selects a provider not on the written list, 12 CFR § 1026.19(e)(1)(vi), (e)(3)(ii) and (e)(3)(iii). Closing Disclosure received no later than three business days before consummation, 12 CFR § 1026.19(f)(1)(ii)(A) and the CFPB Closing Disclosure explainer. Closing Disclosure sections “Services Borrower Did Shop For,” “Other,” and “Taxes and Other Government Fees” (recording fees and transfer taxes), 12 CFR § 1026.38(f)(3), (g)(1) and (g)(4). ALTA 49 and 49.1 endorsements addressing losses caused by deed fraud, forgery, and seller impersonation, American Land Title Association.

This article is for informational purposes only and is not intended to provide legal, financial, or tax advice. Title commitments, exception schedules, endorsements, and purchase agreement language should be reviewed by a licensed real estate professional or attorney in your state. Consult a qualified professional about your situation. Align Lending is an independent Michigan mortgage broker, NMLS #2041154.

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