Title insurance

Title insurance is a form of indemnity insurance, predominantly found in the United States and Canada, that insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Unlike some land registration systems in countries outside the United States, US states' recorders of deeds generally do not guarantee indefeasible title to those recorded titles. For covered risks, title insurance must defend against a lawsuit attacking the title and/or reimburse the insured for the actual monetary loss incurred generally up to the dollar amount of insurance provided by the policy.

The first title insurance company, the Law Property Assurance and Trust Society, was formed in Pennsylvania in 1853. Typically the real property interests insured are fee simple ownership or a mortgage. However, title insurance can be purchased to insure any interest in real property, including an easement, lease, or life estate.

There are two general types of policies – owner and lender. Just as lenders require fire insurance and other types of insurance coverage to protect their loan, nearly all institutional lenders also require title insurance to protect their interest in the collateral of loans secured by real estate. Some mortgage lenders, especially non-institutional lenders, may not require title insurance. Nearly all buyers purchasing properties want title insurance as well.

A loan policy provides no coverage for the buyer/owner. For the buyer to obtain coverage, they must purchase an owner policy; it’s independent of the lender’s requirement, though commonly purchased together at a discounted simultaneous-issue rate.

Title insurance is available in many other countries, such as Canada, Australia, the United Kingdom, Mexico, New Zealand, Japan, China, South Korea, and throughout Europe. However, while a substantial number of properties located in these countries are insured by U.S. title insurers, they do not constitute a significant share of the real estate transactions in those countries. They also do not constitute a large share of U.S. title insurers' revenues. In many cases these are properties to be used for commercial purposes by U.S. companies doing business abroad, or properties financed by U.S lenders. The U.S. companies involved buy title insurance to obtain the security of a U.S. insurer backing up the evidence of title that they receive from the other country's land registration system, and payment of legal defense costs if the title is challenged.