Title insurance

What it means

Most insurance covers what might happen next. Title insurance covers what has already happened and nobody found: a forged signature in the chain of ownership, an unreleased mortgage from thirty years ago, an heir nobody knew about, a boundary that was never what the deed said.

There are two policies and they are not the same. The lender's policy is required by the mortgage, protects the lender's interest, and shrinks as the loan is repaid. An owner's policy is optional, is bought once at closing, and protects the owner for as long as they hold the property. Many buyers pay for the first believing it is the second.

It matters after a death because an estate selling a property has to be able to convey good title, and a defect discovered at that point stops the sale. It matters before one because an heir who inherits a property with a defect inherits the defect, and the owner's policy their parent bought usually does not extend to them.

Why it matters

A title problem is discovered at the moment of sale, when there is a buyer, a date and no time.

a frequent problems in an inherited property are exactly the ones a title search finds: an old lien never released, a deed never recorded, a co-owner who died and was never cleared from the title.

When you are likely to meet it

• When an estate sells a property.
• When a title search turns up something before a sale can close.
• When somebody transfers a house by quitclaim and later tries to sell it.

How this varies by state

Whether title insurance is customary, who pays for it, and whether an attorney's opinion is used instead vary considerably between states.

Related terms

• Bona fide purchaserSomebody who buys property for value, in good faith, without notice of anyone else's claim to it. The law usually protects them, even against the rightful owner.
• DeedThe recorded document that says who owns a piece of real property, and how they hold it.
• LienA recorded claim against property, securing a debt, that has to be dealt with before the property can be transferred cleanly.
• Life estateAn arrangement where one person has the right to use property for their lifetime, and somebody else automatically owns it afterwards.
• Quitclaim deedA deed transferring whatever interest the signer has, with no promise that they have any.
• Real propertyLand and what is permanently attached to it — a house, a barn, a fixed structure. Everything else a person owns is personal property.
• Title searchA check of the public record for what is registered against a property or a vehicle — owners, liens, brands, claims.
• Cloud on titleAnything in the public record that leaves ownership of a property open to question.
• Quiet title actionA court case asking a judge to decide, once and for all, who owns a piece of property.

Sahvelo guidance that uses this

• The empty house