Every other insurance policy you own protects you against something that might happen. Title insurance protects you against something that already happened, that nobody found yet.
The short version
- Title insurance covers ownership defects that already exist but were not found, and you pay for it once at closing.
- The owner's policy protects you. The lender's policy protects only the lender, so having it does not cover you.
- Read Schedule B in the commitment and ask about survey coverage while you are still inside the option period.
What it actually does
When you buy a house, you are buying the seller's ownership rights. If those rights turn out to be defective, such as an old lien nobody released, a forged signature two owners back, an heir who was never accounted for, a recording error or a boundary claim, you inherit the problem.
The title company searches the public record before closing to find these. Title insurance covers what the search missed.
Because it insures against past events rather than future ones, you pay for it once, at closing, and it lasts as long as you own the property.
Two policies, not one
The owner's policy protects you, for the purchase price. In most of Texas, custom has the seller buying this for the buyer, though like everything else in the contract it is negotiable. More on who pays what.
The lender's policy protects the lender for the loan amount. Your lender will require it, and you pay for it. When it is issued at the same time as the owner's policy, it is normally priced at a low simultaneous-issue rate.
These are separate policies covering separate parties. Having a lender's policy does not protect you.
Having a lender's policy does not protect you.
The Texas particulars
Texas regulates title insurance rates at the state level. The premium is set by formula based on the policy amount, so shopping title companies on price does not work the way shopping lenders does. What you are choosing on is competence and responsiveness, which matter more than people expect when a file gets complicated.
The T-47. If the seller provides an existing survey rather than a new one, they sign a T-47 residential real property affidavit stating that nothing has changed since it was made. That affidavit is what lets the title company rely on the old survey. If the seller will not sign it, you need a new survey.
Survey deletion. For an additional premium, you can have the standard survey exception amended so that the policy covers boundary and encroachment issues a current survey would reveal. On a property with fences that do not obviously match lines, or with any easement question, this is money well spent. Ask for it explicitly.
Closing costs guide
Title charges and the rest of the closing costs, and who customarily pays them, are covered in the Texas closing costs buyer guide.
Read the commitment
Before closing, the title company issues a commitment: what they will insure, and what they are excluding. Schedule B is the exceptions list: easements, mineral reservations, restrictive covenants, HOA declarations.
Nobody reads Schedule B. Read Schedule B. That is where you find out there is a utility easement across the back third of the lot where you planned to put the pool, or that the mineral rights were severed decades ago.
This all has to happen while you can still walk, which means inside the option period.
The short version
It is a one-time cost that is largely customary for the seller to carry on the owner's side, it is regulated so the price is the price, and the two things worth actively doing are asking about survey coverage and reading the exceptions.
If you want me to go through a commitment with you on a specific property, send it over.
Keep reading
Questions about this? Talk to Ken.
Call (737) 307-4848 or send Ken a message.
