Title insurance can appear on the closing statement as separate policies for the lender and the owner. The coverage addresses problems with ownership and title, and the terms determine what protection each party receives.
What title insurance covers
Title insurance protects against problems in the ownership history of the property that already existed on the day you bought it and were not found. It is paid once, at closing, and it lasts as long as you have an interest in the property.
Past, not future
Your homeowner's policy is priced against what might happen next: a fire, a storm, a tree. Title insurance is priced against what already happened and has not surfaced yet. That is why there is no monthly premium. The risk does not grow while you own the house.
It was fixed the moment the deed was signed, and the only question is whether anybody finds it.
What the search is looking for
- Liens: unpaid property taxes, a contractor's lien from work done years ago, a judgment against a previous owner
- Mortgages that were paid off but never released in the record
- Errors in the recorded documents, including misspelled names and bad legal descriptions
- Gaps in the chain of ownership, often where an estate was settled informally
- Easements and restrictions that run with the land and bind you whether or not anybody mentioned them
- Forgery, fraud, and signatures by somebody who did not have authority to sign
Most of these are found during the search and cleared before closing, which is the part of the process that quietly does the most work and gets the least credit.
Two policies, and only one of them is yours
The lender's policy is required by the lender, is sized to the loan, and protects the lender. It does nothing for you. The owner's policy is optional, is sized to the purchase price, and is the one that pays for a lawyer when somebody appears with a claim.
Buyers routinely decline the owner's policy on the theory that the lender's policy has it covered. It does not. In Indiana it is common for the seller to pay for the owner's policy, but that is custom, and custom is only where the contract negotiation starts.
Where this actually bites
Long tenure and informal paperwork are the two conditions that produce title problems, and they arrive together. A house held in one family for decades, an estate that was divided by agreement rather than by filing, a quitclaim deed signed between relatives, an addition built by a contractor who was never quite paid. None of it is unusual and none of it is visible from the driveway.
The note on what happens to everything in the house deals with the other half of a long tenure, which is the contents.
What it does not cover
It is not a warranty on the condition of the house, and it is not a survey. Boundary questions, encroachments and anything about where the line actually runs are what a survey is for, and coverage for those may be an endorsement rather than part of the standard policy. It looks back rather than forward: it covers title problems that existed when the policy was issued, subject to the policy's own exceptions and exclusions.
Read the commitment and policy terms before deciding what coverage to accept. The title search and the insurance address related parts of the transaction, but the protection in a particular case depends on the issued policy.
What a specific exception on your commitment means, and whether you should accept it, belongs to an attorney, and a title commitment is worth sending to one when anything on it is unfamiliar. What a policy covers in your situation belongs to the title company that issues it. How an estate, a trust or a life estate should be handled before a sale belongs to an elder law attorney and is much easier to fix before the house is listed than during a contract.
If a family property is the subject, the note on who should be in the room covers the conversation that comes first, and the sellers page sets out what happens once the decision is made.
This note is general. It is not legal or insurance advice, and what any policy covers depends on its terms and on facts only your attorney and your title company can assess.