ABA Family Legal Guide

Buying and Selling a Home

The Steps of Buying and Selling a Home

Making an Offer: The Purchase Contract

What is title insurance?

A title insurance policy serves at least two purposes: First, it provides a search of the legal records of the property and discloses who is authorized to sell the property and what title exceptions exist; second, in the case of the owner's title insurance policy, it is an agreement that the title insurance company will defend against and pay losses involved in any claim covered by the policy's terms, as long as the buyer or the buyer's heirs own an interest in the property, up to the amount of the policy.

Title insurance is available from title companies and, in some states, from lawyers' groups. Title insurance varies in price in different parts of the country. The extent of the protection is only as broad as the language of the policy itself. The buyer's lawyer can help gauge whether the policy is adequate.

Lenders usually require buyers to obtain title insurance that protects only the lender. This is known as a lender's or mortgage title policy. The buyer may have to pay for this additional title insurance or negotiate with the seller to purchase such a policy. For more on title insurance, see chapter 5, "Home Ownership."