Title Insurance Explained: Why It Matters and Who Pays in Your State

Buying a home isn’t just about getting the right mortgage or finding your dream neighborhood. It’s also about locking in your ownership rights so no one can challenge them later. One of the least flashy—but most critical—parts of that protection is title insurance.

Most buyers only see it as a line item on their closing disclosure, but the truth is that title insurance is the backbone of your legal security as a homeowner. It’s the reason you can sleep at night knowing no long-lost heir, unpaid contractor, or clerical mistake can suddenly jeopardize the roof over your head.

What Is Title Insurance?

When you buy a house, the seller transfers ownership to you via a deed. But that deed doesn’t come with a guarantee that the title is clean. Someone else might still have a valid claim to the property, or there could be unpaid debts attached to it.

Title insurance steps in as your shield. It protects you against past problems tied to the property—issues that existed before you bought it but weren’t caught during the title search. That makes it very different from other common types of insurance like homeowners, car, or property insurance, which are forward-looking and protect you from future risks such as fire, flood, or collisions. Title insurance is backward-looking: it scans history for hidden issues that could threaten your rights today.

Common risks covered include:

• Liens from unpaid property taxes, HELOCs, or contractor bills. These matter because they give creditors a legal claim against your property. For example, unpaid taxes can allow the county to place a lien that must be cleared before you can sell, while a contractor who wasn’t paid can record a mechanic’s lien that clouds your title. A home equity line of credit, if not paid off properly, can also remain attached to the property, forcing the new owner to deal with someone else’s debt.

• Fraud or forgery in prior transactions

• Unknown heirs who appear years later with a claim of ownership (for example, if the seller inherited the home but another family member later proves they also had a legal right, you could face a lawsuit or even a claim that the person who sold to you didn’t actually have full authority to sell)

• Clerical errors in public records or improperly recorded deeds

• Easements, encroachments, or other encumbrances that restrict your use of the land (for example: a utility easement that allows the city to run power lines through your yard, a neighbor’s fence that accidentally sits a few feet over your property line, or deed restrictions limiting how you can build or expand)

Without title insurance, you could be forced to pay off someone else’s debt—or even lose your home—just to defend your ownership.

Two Types of Title Insurance

There are two main flavors of title insurance, and knowing the difference matters:

• Lender’s Title Insurance: Required on nearly every mortgage. This policy protects the lender’s interest in the property, up to the loan amount. The lender requires you to purchase this policy on their behalf as a condition of your loan. If the title is challenged, the lender is made whole.

• Owner’s Title Insurance: Optional, but strongly recommended. This protects you, the homeowner. It covers your equity in the property and pays for legal defense if someone challenges your ownership. It lasts as long as you own the home.

Think of lender’s insurance as protecting the bank. Owner’s insurance protects your financial future.

Why Title Insurance Still Matters in 2025

Title claims are rare—but when they happen, the stakes are massive. A couple who bought a foreclosure property in Texas discovered years later that the IRS had invalidated the original sale due to unpaid tax liens. Their title insurer fought the case and covered the costs. Without coverage, they would have lost their home outright.

Title insurance isn’t about odds—it’s about protection. For a one-time premium, you insulate yourself against risks that could cost hundreds of thousands of dollars.

How Much Does Title Insurance Cost?

Title insurance is paid once at closing (but who pays depends on the state). For purchases, the total title-related charges—owner’s policy, lender’s policy (often at a simultaneous‑issue discount), endorsements, title search/exam, escrow/settlement, and recording—typically land between one and three percent of the purchase price. The exact number depends on:

• Home price (premiums are banded by price tiers)

• State rules (some states regulate rates; others allow more variance)

• Coverage and endorsements (e.g., survey coverage, condo endorsements)

• Which party pays which portion (customs vary by state/county)

A few practical notes for buyers/homeowners looking to refinance:

• Regulated‑rate states (e.g., Texas, Florida): You won’t price‑shop the premium—the state sets it—but you can still compare settlement fees and service quality. On a $500,000 Texas purchase, it’s common for combined title charges to fall within the one to three percent band.

• Simultaneous‑issue discount: When owner’s and lender’s policies are issued together at purchase, the lender’s policy is heavily discounted. Most of the spend is the owner’s policy plus endorsements.

• Refinances are different: Your owner’s policy continues—you don’t rebuy it. You’ll purchase a new lender’s policy, often at a reissue/substitution rate (lower than purchase), and you’ll still pay for updated search/settlement/recording. If you want to minimize out‑of‑pocket expenses, consider a no‑closing‑cost refinance where the lender credits these fees in exchange for a slightly higher rate (guide here).

• VA IRRRLs can be lean: With a VA IRRRL, title/settlement costs are typically streamlined compared with conventional refis; you’ll still need a lender’s policy, but the overall fee stack is often lighter.

Bottom line for budgeting: For a purchase, plan on 1% to 3% of the purchase price for the full title stack (policies + endorsements + settlement). For a refinance, expect meaningfully less than a purchase thanks to reissue rates and fewer endorsements. And remember: it’s a single payment that protects your ownership for as long as you hold title.

Who Pays for Title Insurance On Purchases? Some State-by-State Customs

When you’re buying a home, title insurance is a non-negotiable part of the process. What is negotiable, however, is who pays for it. State and county customs influence whether the buyer or seller picks up the tab—but remember, these are just traditions, not laws. With the right strategy, you can often shift the cost in your favor when making an offer.

California: In Southern California, sellers usually cover the owner’s policy, while buyers cover the lender’s. Up north, buyers often pay for both policies. If you’re shopping in San Francisco or Silicon Valley, expect to budget for the full amount unless you negotiate it into your purchase contract.

Texas: The seller traditionally pays for the owner’s policy, while the buyer covers the lender’s. Because Texas regulates title insurance rates, you won’t shop for a cheaper policy—you’ll negotiate who pays. In a slower market like Austin in 2025, buyers can sometimes secure both policies covered by the seller as part of concessions.

Virginia: Buyers are typically responsible for both policies. In competitive Northern Virginia markets like Arlington and Alexandria, sellers rarely agree to cover title insurance. In smaller cities, however, you may have room to ask for concessions if you structure your offer strategically.

Florida: Payment customs vary dramatically by county. In Miami-Dade, Broward, and Collier, sellers cover the owner’s policy. In Orlando, Tampa, and Jacksonville, the buyer usually pays. Knowing the local expectation can help you structure a stronger offer while still negotiating seller contributions.

North Carolina: Buyers usually pay both policies, though rates are standardized. That said, motivated sellers in slower-moving markets may agree to cover costs to close the deal faster.

New Jersey & Connecticut: Buyers nearly always cover title insurance in both states. However, with higher-end homes that have sat on the market, sellers may be more willing to negotiate coverage to secure a quick sale.

Michigan & Ohio: Sellers typically cover the owner’s policy, while buyers pay the lender’s. This split is seen as fair, but in markets where sellers need to sweeten the deal, you might be able to push for additional coverage.

Illinois: Especially in Chicago, sellers almost always pay for the owner’s title insurance, while buyers cover the lender’s. For buyers, this means a meaningful cost savings already built into local custom.

Title Insurance in Refinances

Refinancing comes with its own quirks.

• Owner’s Title Insurance: Good news—you don’t need to buy it again. The original policy continues to cover you.

• Lender’s Title Insurance: Bad news (sort of)—you do need a new one. Because a refinance creates a brand-new loan, your lender requires a fresh policy.

This cost is usually lower than during a purchase but still part of standard refinance closing costs. The good news is, if you don’t want to bring that money to the table at closing, there are solutions. A no-closing-cost refinance allows the lender to credit those fees in exchange for a slightly higher rate or loan amount—meaning you can still move forward without writing a big check up front.

For veterans, the news is even better. With a VA IRRRL (Interest Rate Reduction Refinance Loan), the title insurance process is streamlined and other closing costs are kept intentionally low. You still need lender’s coverage, but VA guidelines make these refinances some of the smoothest and most affordable options available.