The costs associated with buying a home can be alarming to many buyers: survey fees...inspection fees...origination fees...recording fees – and insurance.

Most buyers understand the need for homeowners and hazard insurance. They know they need to be protected against potential risks such as fire, flood, or personal injury. But when it comes to title insurance, buyers frequently ask, “Why do I need to buy an owner’s policy and a lender’s policy?”

The simple answer is that title insurance is meant to protect against title issues that could threaten the financial investment in a property for the mortgage lender as well as for the buyer.

Owner’s title insurance, which lasts for as long as the buyer owns the property, protects the new owner against any threat to ownership or financial loss due to unforeseen claims made by others.

In the same way, the mortgage lender, in addition to requiring the buyer to have physical hazard insurance on their new home, requires equal protection against title hazards.

Title insurance begins with a search of public records to determine that title to the property is clear – that, among other things:

• Deeds, wills and trusts contain no incorrect names or wording
• There are no outstanding mortgages, judgments, or liens against the property
• There is no pending legal action against the property that could affect the buyer
• All notary acknowledgements are correct

But even the most careful search of records may not discover the existence of all potential title hazards, such as:

• A forged signature on the deed
• An unknown heir of a previous owner who comes forth to claim ownership
• A document executed under an expired or fabricated power of attorney
• Mistakes in the public record

Title insurance provides financial protection against all such covered title hazards, and the insurer must either clear any imperfections on title or pay valid claims – all for a one-time charge at closing.

Depending on state law and/or local practice, the buyer may pay an additional premium for the owner’s policy or pay a simultaneous amount for a separate lender policy. Some buyers and sellers decide to split the costs and average cost varies per policy, depending on where you live and the price of the home.