ABA Family Legal Guide

Home Ownership

Property Rights and Restrictions

Safeguarding Property Rights: Title Insurance

How does title insurance work?

Title insurance is the opposite of your home's casualty and liability insurance, which repay you in case of injury or damage occurring after the effective date of the policy. Title insurance only covers matters that occurred before the policy's effective date, but were discovered later. Instead of having to pay premiums year after year to maintain the coverage, you only have to pay once to be covered as long as you own the property. Note, however, that many lenders insist on a new policy before refinancing to make sure their new loans will have first priority. They want to know if you have taken out a second mortgage, obtained a home improvement loan, or been subject to a court judgment between the time of the original mortgage and the new one. (For more information about title insurance, see chapter 4, "Buying and Selling a Home.")