Title Insurance Law and Legal Definition

Title insurance is a policy issued by an insurance company guaranteeing that the title to a parcel of real property is clear of any claims or liens and properly in the name of the title owner and that the owner has the right to sell or otherwise transfer the property to another. The insurance company will pay the damages to the new title holder or secured lender or take steps to correct the problem if a problem with the property ownership is later discovered, such as an incorrect boundary description.

Title insurance covers problems that did not show up during the title search or were missed by the examiner and errors in public records. Title insurance does not cover defects that occur after you purchase the property. Policies often exclude problems having to do with easements, mineral and air rights, and liens. Title insurance policies are paid in-full with a one-time fee which is usually part of closing costs. Payment is usually made by the buyer, unless the state requires the seller to purchase title insurance or the seller agrees to pay for it.