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The Ins and Outs of Title Insurance

Many people don’t really understand the value of title insurance until they’re in the thick of the home-buying process. Title insurance ensures that you and your lender will be protected in the event that the seller or previous owners didn’t have absolute ownership of the house. So, how much does title insurance cost for home buyers? The average cost of title insurance is around $1,000 per policy, but that amount varies widely from state to state and depends on the price of your home. Here, Realtor.com examines the ins and outs of title insurance, why home buyers need it, how much you can expect to pay, and most importantly, how you can save on a title insurance policy.

What is title insurance?

Holding a title insurance policy means you and your mortgage lender are protected against any financial loss or title issues due to liens, disputes between previous owners over wills, clerical problems in courthouse documents, or fraudulent claims against the property or forged signatures. A title search will be performed by your title or settlement company to uncover any issues with your title that could give you legal troubles down the line. The title company then insures your claim to the property’s title. If anything is missed during the search, or there are lawsuits questioning your legal ownership of the property after closing, your title insurance policy will cover the costs of resolving the problem.

Lender’s title insurance vs. owner’s title insurance

There are two types of title insurance: lender’s and owner’s. Almost every lender will require you to pay for a lender’s title insurance policy. This protects the lender—not you—from incurring any costs if a title dispute pops up after closing. Owner’s title insurance usually is optional, but it’s highly recommended. Without it, you’ll be left footing the bill for all the costs of resolving a title claim, which could be thousands or even hundreds of thousands of dollars. A title insurance policy is one of those things that can save you money in the long run.

How much does title insurance cost?

Title insurance premiums can vary from a couple of hundred dollars to a couple of thousand dollars. Some factors that can affect the cost of your premium include the title search, examination and expected cost of any title defects. The average cost of title insurance is $1,000 per policy, but that amount varies widely from state to state and depends on the price of your home. A one-time payment is made when or before you close on your house. Each policy price generally is based on the purchase amount of the home or the total amount of the loan. Title insurance is a highly regulated industry, so title insurance policy types and costs will vary from state to state. In California, the state has unfixed premiums, which means that buyers can shop around.

How to save on title insurance

Shop around: If premiums are unregulated in your state, find the company that offers the best deals. Just make sure you’re not sacrificing customer service to save a few dollars. Resolving a title issue can be stressful, and you want a company that will help you through the process. Read reviews and talk to your real estate agent for recommendations.

Bundle: Some companies will offer a discount if you bundle your lender’s and owner’s policies.

Negotiate add-ons: There almost always are other fees built into your total premium price. See if there is any wiggle room with those items. They may be optional, or the insurance company might be open to discounting them.

Negotiate with the seller: Closing costs always are open to negotiation, and picking up the tab for the title insurance might be worth it to a seller who’s highly motivated to close the deal. But be wary of using this tactic in a competitive market.