Title Insurance
Title insurance protects against problems with a home's ownership history — called title defects — that surface after the sale: an unpaid contractor's lien, a forged signature on an old deed, an unknown heir with a claim, or a clerical error in county records.
Before closing, a title company searches public records and clears what it finds; the insurance covers what the search missed. Unlike most insurance, it's a one-time premium paid at closing as part of your closing costs, and it covers events that happened before you bought, not after.
There are two policies. The lender's policy is required with any mortgage and protects only the lender's balance. The owner's policy is optional but protects your home equity — including all future appreciation — for as long as you own the home, typically for a few hundred dollars more. Which party customarily pays for it varies by state and is negotiable.
When refinancing, the new lender requires a fresh lender's policy (usually at a discounted "reissue rate"), but your original owner's policy stays valid.
Related terms: Closing Costs, Escrow, Home Equity.
