What Title Insurance Covers

Title insurance protects against problems with property ownership that could affect your right to the home. Here's what it covers and why it matters.

What Is Title?

"Title" refers to your legal ownership of the property—your right to possess, use, and sell it. Clear title means no one else has a valid claim to your property.

What Could Go Wrong?

Even with a title search, hidden issues can surface:

Errors in Public Records

• Clerical mistakes in recorded documents
• Incorrect legal descriptions
• Filing errors

Unknown Liens

• Unpaid contractor liens
• Tax liens
• Judgments against previous owners

Fraud and Forgery

• Forged signatures on deeds
• Fraudulent impersonation of owners
• Invalid powers of attorney

Unknown Heirs

• Previously unknown heirs claiming ownership
• Missing heirs from estate proceedings
• Disputed wills

Boundary Issues

• Survey errors
• Encroachments discovered later
• Easement disputes

Undisclosed Encumbrances

• Restrictions on property use
• Easements not in public records
• Covenants that affect your use

Two Types of Title Insurance

Lender's Policy (Required)

Protects the lender's interest in the property:

• Required by virtually all lenders
• Covers loan amount (decreases as you pay down mortgage)
• Doesn't protect you, only the lender
• You pay for it

Owner's Policy (Optional but Recommended)

Protects your ownership interest:

• Covers the full purchase price
• Protection lasts as long as you or your heirs own the property
• One-time premium at closing
• Protects against claims the lender's policy doesn't cover for you

What Title Insurance Pays For

If a covered claim arises, title insurance covers:

• Legal defense costs
• Settlement of valid claims
• Your losses up to policy limits
• Cost to clear title issues

Example Scenario

You buy a home. Two years later, an heir of a previous owner appears with a valid claim to the property due to a forged signature on an old deed.

Without owner's title insurance: You'd need to hire attorneys, potentially pay to settle the claim, or lose the property entirely.

With owner's title insurance: The title company handles the defense and pays any covered losses.

What Title Insurance Doesn't Cover

• Issues you knew about before buying
• Government actions (like zoning changes)
• Native American land claims (in most policies)
• Environmental issues
• Issues arising after you purchase

Enhanced policies may cover additional items—ask about coverage options.

The Cost

Title insurance is a one-time premium paid at closing:

• Lender's policy: Based on loan amount
• Owner's policy: Based on purchase price
• Combined purchase: Usually cheaper than buying separately

In California, title costs vary by county and company. Shop around—prices can differ.

Who Pays?

In California, this is negotiable and varies by county custom:

• In some areas, the seller traditionally pays for owner's policy
• In other areas, the buyer pays
• The buyer typically pays for lender's policy
• Everything is negotiable

Is Owner's Title Insurance Worth It?

Consider:

• One-time cost for lifetime protection
• Covers legal fees alone if a claim arises
• Peace of mind for your largest investment
• Problems may surface years after purchase

Most buyers find the relatively small cost worthwhile for the protection provided.

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Questions about title insurance? Contact Greg Franklin or call (559) 816-7780 to discuss your transaction.