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Ever wonder what would happen if you purchased a home, but the divorcee of the previous owner came back claiming to own the house? Us either. But in case you are wondering now: that, my friend, is what title insurance is for.

What is title insurance?

Title insurance is insurance on the title of your home. This insurance ensures protection for the buyer and the lender against any issues with the title during the transfer of property ownership. Examples of these issues include nearly everything from hidden taxes to ownership of the property that was not transferred at the time of sale. While title insurance is not mandatory, many recommend it even if you buy the home outright.

The process usually goes as follows:

At the time of sale, the title company or an attorney employed by the title company will investigate to make sure the title is clean and free to transfer. From there, the title company works with an underwriter to issue an insurance policy for both the lender and the buyer paying for legal defense and compensation for the property if another legal owner comes forward.

Who pays for title insurance: buyer or seller?

While it varies from state to state, it is customary for the seller to pay the buyer's policy and the buyer to pay the lender's policy. However, both the buyer and the lender's policies are covered in the home buyer's escrow funds. The cost is then lumped in with the rest of the closing costs where it is divided up according to the contract.

How much does title insurance cost?

While the cost of title insurance varies based on the location, amount of the loan, and other such factors, home buyers can expect to pay a one-time rate in the range of $1000 to $4000 per policy. So, with both the buyer and lender's policy, the price would be between $2000 and $8000.  This may seem like quite a lot to pay for insurance, especially when compared to your car or renter’s insurance, but since you ’re only paying one time for as long as you own the home, it comes out to a pretty great deal.

Do you need title insurance if you pay cash?

Although not mandatory, many recommend that you have title insurance even if you pay for your title outright. Doing so ensures you are legally protected if there are issues with your title that were missed in the investigation process. You want to make sure that no one can come after you for anything that happened with the house before you bought it. Paying cash eliminates the need for a lender's title insurance policy, though, leaving only one policy fee for the buyer.

How long is a title insurance policy good for?

As title insurance differs from other types of coverage in the sense that there is only a one-time payment, many wonder how long their policy lasts. The answer: as long as you or your heirs own the property. You never have to renew your policy or worry about the pre. If you think of the policy rate regarding holding the title for generations-- you get a steal of a deal!

Looking for a local, full-service agent from a major brand that will list your home for a flat fee of $3,000 or 1%  on homes more than $350,000? Clever can help. Give us a call at Call 1-833-2-CLEVER or complete our online form to get connected a top-rated local agent that will list your home with a discounted commission rate.


Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

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