Title insurance is unique. Unlike other insurance options that require monthly premiums, title insurance is charged as a one-time fee. It is paid by the buyer at closing, and is approximately equal to .5% of the purchase price. Basically it protects you and your lender from liens or defects unknown when you bought the policy. These items are most often discovered years later when you try to sell your home. But they can also arise if someone challenges the title of your property while you own it. For example, a neighbor claiming they own a portion of your property under eminent domain. Although these matters are rare, they do happen. In that case the title company will defend a covered claim and rectify it if possible, or pay the amount of your actual damages up to the policy amount. For more, see my past blogs What’s in a Preliminary Title Report and Decoding Sale and Loan Docs – Part 5 for what title insurance covers.
