Quick Answer
Title insurance protects against financial loss from defects in a property's title — undisclosed liens, ownership disputes, forged documents, or recording errors. Unlike most insurance, it's paid once at closing and covers problems that already happened before you bought. Lenders require their own policy; the optional owner's policy is what protects your equity.
- Covers
- Ownership problems predating your purchase
- Paid
- Once, at closing
- Lender's policy
- Required by your lender
- Owner's policy
- Optional but protects your equity
- Examples
- Liens, forged deeds, recording errors, unknown heirs
Title insurance is the closing cost buyers most often question, because it protects against something invisible: the possibility that someone else has a claim on the property you're buying.
What Can Go Wrong With a Title
A property's title is its ownership history. Problems that can surface later include unpaid contractor liens, unpaid property taxes from a prior owner, an unknown heir with a claim to the property, a forged or improperly executed deed, clerical errors in public records, or an undisclosed easement.
Any of these can cost you money or, in the worst cases, your ownership — even though none of them were your doing.
How It's Different From Other Insurance
Your homeowner's policy covers future events: a fire, a storm, a burglary. Title insurance covers past events that hadn't been discovered yet. That's why it's a one-time premium rather than a recurring one — the risk being insured is already fixed in the past.
Before issuing it, the title company searches public records to find and clear problems. Most issues get resolved before closing; the policy covers what the search missed.
Two Policies, Two Purposes
The lender's policy is required if you're financing. It protects the lender's interest up to the loan amount — and only the lender's.
The owner's policy is optional and protects you, up to the purchase price, for as long as you own the home. It's frequently issued at a reduced simultaneous rate when purchased alongside the lender's policy.
Buyers sometimes skip the owner's policy to save money at closing. It's worth understanding that this leaves your equity unprotected while your lender remains fully covered — you'd be paying for a policy that protects only the bank.
Who Pays in Indiana?
Who pays for which policy is negotiable and varies by transaction and local custom. It's a line item in your closing costs, and sellers should expect title and closing fees among their seller costs. In Indiana, title companies typically handle closing and also serve as the escrow holder.
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Frequently Asked Questions — Title insurance
Do I really need an owner's title insurance policy?
It is optional, but skipping it leaves your own equity unprotected while your lender's policy remains fully in force. The owner's policy protects you up to the purchase price for as long as you own the home, and it is often issued at a reduced simultaneous rate when bought alongside the lender's policy.
What does title insurance actually cover?
Financial loss from ownership problems that existed before you bought, including undisclosed liens, unpaid taxes from a prior owner, unknown heirs with a claim, forged or improperly executed deeds, recording errors, and undisclosed easements. It does not cover damage to the home itself.
How much does title insurance cost in Indiana?
It is a one-time premium paid at closing, and the amount scales with the purchase price and loan amount. Who pays for which policy is negotiable and varies by transaction. Your title company can quote exact figures, and it will appear as a line item on your closing disclosure.