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Ask Charles Cherney - Question #28 - What is title insurance?

What is title insurance?

To quote attorney Richard Vetstein, "Title insurance is policy of insurance (technically an indemnification policy) protecting homeowners and lenders from actual financial loss in the event that certain covered problems develop regarding the rights to ownership of property. While Massachusetts closing attorneys search and certify each title to real estate before a closing, there are often hidden title defects that even the most careful title search will not reveal. In addition to protection from financial loss, title insurance pays the cost of defending against any covered claim."

Attorney Vetstein has written several excellent blog posts on title insurance on his Massachusetts Real Estate Law Blog.

Be sure to read Vetstein's post Title Insurance Demystified.

I also encourage you to read Vetstein's post An Ounce of Prevention Is Worth a Pound of Cure: Enhanced Owner’s Title Insurance Offers Valuable Benefits.

As Vetstein notes, title insurance is a one-time premium paid at closing, and the cost of title insurance is calculated based on the purchase price of your home. There are two types of title insurance: lender’s policies and owner’s policies. Lender’s policies are required by most every public mortgage lender in the U.S., and lender's policies are typically paid as part of closing costs. Owner’s policies are optional and paid for by home buyers. The cost for standard coverage for an owner's policy is $3.65 per $1,000 in home value. Enhanced coverage policies run $4.00 per $1,000 and provide better coverages. When you purchase both lender’s coverage (always required by mortgage lenders) and owner’s coverage at the same time, there is a substantial discount.To get a better sense of the cost title insurance, you can review Stewart's rate book for the Commonwealth of Massachusetts.

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