What is Title Insurance Anyway?

Q: What types of title insurance are there, and are they required?

A: There are essentially two types of title insurance: lender's title insurance and owner's title insurance. The bank issuing your mortgage will require you to buy lender's title insurance. However, this only covers the amount of your mortgage, and coverage only lasts for the duration of the loan.

An owner's policy, which is optional, is intended to bridge any gaps in coverage, said Martin Schwartzman, assistant deputy superintendent for the New York State Insurance Department.

In general, title insurance protects you from pre-existing liens on a home. But some owner's policies will also protect you from liens that might appear after the purchase, perhaps as a result of fraud, according to the American Land Title Association, an industry group based in Washington, D.C.

While it sounds like a good bet, owner's title insurance isn't the norm everywhere. In upstate New York, many people don't buy owner's coverage and instead rely on their lawyers' guarantees that a title is clear, said Ellen Buxbaum, an attorney for the New York State Insurance Department.

If it turned out there was a lien on the home, and the lender's policy doesn't cover it, the owner might go after the attorney for the cost, Buxbaum said.

Regardless of where you live, it's worth considering owner's title insurance.

"Most people will say that (a house) is such a significant investment, that the price is relatively small," Schwartzman said.