US title insurance: owner's and lender's policies, and who can shop

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Title insurance is one of the least understood lines on an American closing statement. It is paid once, it is often chosen in a hurry, and many buyers leave the closing table unsure whether the policy they paid for protects them or their lender. The answer depends on which of two policies was bought, and the two are not interchangeable.

The rules sit at two levels. Federal consumer rules, written by the Consumer Financial Protection Bureau (CFPB), govern how the cost is disclosed, how far it may rise before closing and who may be paid for referring the business. The price itself and the wording of the policy belong to the states, and the states do not agree: Texas fixes one premium for every company, while California lets each company file its own.

This guide explains what a title policy insures, how the owner's and lender's policies differ, how two large states set the price, what federal law says about a buyer's right to pick the provider, and how to read the documents that arrive before and after closing. It describes general rules; how they apply depends on the state, the loan and the contract.

Texas Department of Insurance, rates effective 1 March 2026 and title insurance FAQ; CFPB consumer guidance on Loan Estimate cost changes.

What a title policy insures

At a purchase, the buyer receives a deed showing that the seller transferred legal ownership, which the CFPB calls "title". Title insurance deals with the possibility that this ownership is not as clean as the deed suggests.

The Texas Department of Insurance (TDI) describes the product as cover against financial loss from defects in the title to real estate. Under a policy, the title company defends a lawsuit that attacks the title or, for a covered loss, reimburses the insured up to the policy limit. The California Department of Insurance (CDI) adds that the insurer pays covered losses up to the face amount of the policy, together with related legal expenses.

What sets it apart from most insurance is the direction it looks. A title policy covers problems that already existed when the policy was issued but were not known then. TDI lists examples: forgery, fraud or impersonation in an earlier transfer, documents that were improperly signed, notarised or recorded, heirs nobody disclosed, a prior foreclosure that was not carried out properly, and easements that were never recorded. It also lists liens, such as an unpaid earlier mortgage, a court judgment, unpaid taxes or a claim by a contractor for work that began on or before the policy date. The CFPB gives two everyday cases: a previous owner who did not pay property taxes, and contractors who say they were never paid for work done before the sale.

Both state regulators draw the line with homeowners insurance. Title insurance does not cover fire, flood, theft or any other damage to the building, TDI says, and it does not guarantee that the owner will be able to sell the property or borrow against it. In California, according to CDI, a title insurer may not sell homeowners insurance at all.

Owner's policy and lender's policy

Two separate policies can be issued on the same purchase, and they protect different parties.

The lender's policy, called the loan policy in Texas, protects the lender. The CFPB says it covers only claims that affect the lender's loan and does not protect the borrower's equity in the home. Most lenders require the buyer to purchase it, and according to CDI it is usually written for the amount of the loan. TDI notes that Texas law does not require title insurance, but that lenders require a loan policy to protect their interest.

The owner's policy protects the buyer. The CFPB describes it as optional and says it can protect a homeowner when someone sues claiming a right to the home that dates from before the purchase. CDI says an owner's policy is usually written for the purchase price and protects the buyer for as long as the buyer owns the property. The American Land Title Association (ALTA), the national trade body of the title industry, founded in 1907, says on its consumer education site that the cover extends to the owner's heirs for as long as they own the home.

The practical consequence is spelled out by the CFPB: if someone sues claiming a right to the home, the homeowner is the first person responsible. A buyer who holds only the lender's policy has paid for a policy that answers to the lender. CDI makes a related point that surprises some buyers: the policy held by the previous owner does not protect the new one.

One premium, paid once at closing

Both state regulators and ALTA describe the same payment pattern. The premium is paid a single time, at closing, and there are no renewal premiums afterwards. CDI contrasts this with homeowners insurance, which is usually billed periodically.

The premium is tied to the amount of cover. In Texas, TDI says rates are based on the sale value of the property; in California, CDI says premiums are based on the dollar amount of coverage. TDI also explains what the Texas premium pays for: the title search, the title examination and the closing.

The search is where most of the work happens. Title agents go through deeds, mortgages, wills, divorce decrees, court judgments, tax records, liens and maps, TDI says, to find problems that can be fixed before the purchase. ALTA's consumer material says that when the search turns up a problem, the title professional usually resolves it, often without the buyer knowing.

Who pays is a matter of contract and local habit, not of federal law. TDI says buyer and seller may negotiate who pays the premium. CDI describes customs inside one state: in Southern California the seller customarily pays for the owner's policy, in Northern California the buyer customarily does, with the cost occasionally split, and in almost every county the buyer pays for the lender's policy. CDI stresses that these are customs, and that the parties may agree otherwise.

Who sets the price: the states

Whether a buyer can save money by comparing title premiums depends first on the state. Texas and California sit at opposite ends.

The two regulators therefore give different shopping advice, and neither can be carried across the state line. The other states have their own rules, which this guide does not cover; the state insurance department is the place where each one is set out.

Texas: one premium for every company

In Texas, TDI says, rates are regulated: the department sets the premium, and all title companies charge the same premium for a policy. There are no discounts on it, and each title agent must charge the same amount.

The current schedule took effect on 1 March 2026. According to the rate page TDI publishes, the basic premium on a policy of US$100,000 is US$780. For a policy between US$100,001 and US$1 million, the rule is to take the amount above US$100,000, multiply it by 0.00494, round to the nearest dollar and add US$780. Each additional US$100,000 of cover in that band therefore adds US$494. Above US$1 million a lower multiplier applies: 0.00406 on the amount over US$1 million, added to US$5,226.

The loan policy is where the Texas schedule matters most to a borrower. TDI's FAQ says that when an owner's policy and a loan policy are bought together, the loan policy is issued at a discounted price of US$100; without an owner's policy, the loan policy costs the full price. As a worked example, assume a purchase at US$350,000 with both policies bought together: the owner's policy costs the basic premium of US$2,015 and the loan policy US$100, a total of US$2,115 before any endorsements or other charges. The example assumes the US$100 figure in the FAQ still applies under the 2026 schedule, which the rate page does not address.

One point of care on dates. The TDI FAQ, last updated on 19 March 2024, still gives a basic premium of US$832 for a US$100,000 property, while the rate page effective 1 March 2026 gives US$780. The department does not explain the difference on either page. The FAQ carries the older date, and the rate page is the one that states the rates in force from 1 March 2026.

A fixed premium does not mean a fixed closing bill. TDI says closing costs and escrow fees differ between agents, so those can be compared. Extra charges may include tax certificates, escrow fees, recording fees and delivery expenses, and TDI suggests asking for documentation of what they actually cost. Texas buyers may choose any title company: lenders, builders and real estate agents cannot require a specific one, the department says.

California: filed rates that differ by company

California takes the other route. According to CDI, every title insurer, underwritten title company and controlled escrow company must file its schedule of rates, its forms and any changes with the Insurance Commissioner. An underwritten title company, in CDI's definition, is one that prepares the searches, examinations and reports a title insurer relies on to write its policies.

Because each company files its own schedule, prices differ. CDI explains that each company has its own loss experience and expenses, and says consumers can save by comparing. It adds that the person paying for the policy chooses the insurer, and that a buyer may use one company for escrow and another for title insurance.

Discounts exist but are not automatic. CDI lists several that companies may offer and that must be requested: a rate for first-time buyers, a "short-term rate" for a property that was sold within the last five years, a "concurrent" rate when the same company issues the owner's and the lender's policies, a bulk rate for homes in a new subdivision, and refinancing discounts. The CFPB makes the same general point for the country as a whole: where a buyer purchases both policies, the total is usually lower with a single provider.

There is a limit on the other side. Once a schedule is filed, a company may not undercut it for one customer: CDI says offering a fee below the currently effective filed schedule is unlawful. Comparison in California is between companies' filed rates and the discounts written into them, not a negotiation of a one-off price.

California buyers also choose a level of cover. CDI describes a standard policy, which covers defects that can be found in the public record plus a limited number of risks that cannot, and an extended policy, which adds "off-record" risks such as unrecorded liens, easements, encroachments and boundary conflicts. For an extended policy the insurer typically requires a survey. The lender usually specifies which type of lender's policy it needs.

What federal law says about choosing the provider

Three federal provisions frame the buyer's choice, whatever the state.

The first concerns the seller. Regulation X, the CFPB rule that implements the Real Estate Settlement Procedures Act (RESPA), states at 12 CFR 1024.16 that a seller of property bought with a federally related mortgage loan must not violate section 9 of RESPA. Both TDI and CDI describe what that section means: a seller may not make the sale conditional on the buyer using a particular title company. TDI directs complaints about RESPA to the CFPB.

The second concerns the lender's paperwork. Under Regulation Z, at 12 CFR 1026.19(e)(1)(vi), a creditor that allows the consumer to shop for a settlement service must give a written list of providers, with at least one provider for each such service. The CFPB says buyers can usually choose a title insurance provider separately from the mortgage, and that shopping around could save money.

The third concerns people who profit from a referral, covered further below. Someone with an ownership interest in a title provider may refer business to it, but under 12 CFR 1024.15 may not require the buyer to use it.

The lender's list and the 10 per cent limit

The choice of provider has a second effect: it decides how far the title charges may rise between the Loan Estimate and closing. The CFPB sets out three cases.

1. The buyer picks a provider from the lender's written list. Fees for required third-party services from listed providers may rise by up to 10 per cent in total.
2. The provider is an affiliate of the lender. The cost cannot change.
3. The buyer picks a provider that is not on the list. The cost can change by any amount.

The 10 per cent limit applies to the total of the charges in that group, not to each line. As a worked example, assume the Loan Estimate shows US$2,000 in required services that the buyer then obtains from listed providers, the lender's title policy among them. One line may rise by more than a tenth and another fall, but the group total may not exceed US$2,200 at closing, which is US$2,000 plus 10 per cent.

Going off the list removes that ceiling. A buyer who brings in another title company gains the freedom to compare and loses the federal cap on that charge. In a state where the premium is the same everywhere, such as Texas, the difference then lies in the fees around the premium.

Lenders keep some choices for themselves. Regulation X, at 12 CFR 1024.15(b)(2), allows a lender to require a borrower to pay for an attorney, a credit reporting agency or an appraiser that the lender has chosen to represent its own interest.

Referrals, affiliates and the attorney's role

Title insurance is usually arranged through someone the buyer already works with: a real estate agent, a lender, a builder or an attorney. RESPA regulates what those people may receive.

The basic rule in 12 CFR 1024.14(b) is that no fee, kickback or thing of value may be given or accepted for referring settlement business, title services included, on a federally related mortgage loan. California's regulator describes the same conduct under state law: CDI calls it an unlawful rebate when a lender, real estate broker or homebuilder receives free or discounted services, property or money for steering business to a title company, and says that paying anyone for the referral or placement of title insurance is unlawful.

Payment for real work is another matter. Regulation X permits a title company to pay its duly appointed agent for services actually performed in issuing a policy (12 CFR 1024.14(g)(1)(ii)). Where the agent is an attorney, 12 CFR 1024.14(g)(3) requires the attorney to perform core title agent functions that are separate from the legal work, such as clearing underwriting objections or issuing the policy.

Ownership links are allowed if they are disclosed. Under 12 CFR 1024.15(b), a person who refers a buyer to a title provider in which that person holds an ownership interest must hand over a written Affiliated Business Arrangement Disclosure, in the format of Appendix D to the regulation, showing the estimated charge or range of charges, and may not require the buyer to use that provider. An attorney or law firm may arrange a client's title insurance as part of representing the client; in that case the disclosure is due no later than the moment the client engages the attorney.

From commitment to policy: exceptions and exclusions

The policy is the last document in a sequence, and the earlier ones decide what it will cover. TDI describes the Texas sequence; in California, CDI says the buyer should receive the results of the search in a preliminary title report or commitment.

The commitment deserves the closest reading. TDI says it sets out what the seller must fix and lists potential issues, but does not guarantee that no issue exists. Items in it can become exceptions in Schedule B of the policy, the part that lists what this particular policy will not cover. Texas policy forms are standardised, so most of the wording is identical from one company to the next; what changes is the property description in Schedule A, the Schedule B exceptions and the exclusions. TDI says a buyer can ask for corrections, and that an exception may be removed if the problem is cleared or additional cover is bought.

Some risks are left out as a rule. TDI's list of general exclusions includes defects created after the policy is issued, defects the insured created or knew about, certain taxes and assessments, rights claimed by people occupying the property, building, zoning and environmental violations, and restrictive covenants that were disclosed. Boundary disputes with neighbours are not covered in Texas unless additional cover is bought, which is why TDI suggests comparing the legal description in the policy with the survey.

Extra cover comes through endorsements. CDI describes them as optional additions at extra cost; its examples include environmental protection liens, the accuracy of boundaries and adding a living trust as a named insured. Endorsements required by the lender are ordered automatically by the title or escrow company. ALTA publishes its own endorsement forms, among them the ALTA 49 and 49.1 Endorsements, which it says offer protection against certain losses from forgery of a deed or mortgage. Fraud and forgery account for 21 per cent of the dollars title insurers spend on claims and losses, according to ALTA, which cites an analysis by the actuarial firm Milliman putting the average such claim at more than US$143,000.

When a claim does arise, timing matters. TDI tells policyholders to notify the title company immediately if a lien or claim appears, because delay could jeopardise the claim, and to follow the claim procedure of the policy's underwriter.

Reading the paperwork, and the tax treatment

Title charges often look different on two documents for the same closing. Depending on the state, the CFPB says, a settlement agent, lawyer, lender, real estate agent or title company may hand over an itemised list of fees at closing that includes title insurance. State law may require that list in a format that differs from the federal forms, so the premium on the title company's paperwork may not match the one on the Loan Estimate or Closing Disclosure. The CFPB says that does not necessarily mean an overcharge. Its check is to add up every title-related cost on the title company's paperwork: the total should match the title-related totals on the federal forms.

CDI adds four checks on the policy itself for California buyers: that the owner's policy amount equals the purchase price, that the lender's policy amount equals the loan amount, that the effective date matches the actual closing date, and that the policy describes all the property and all the interests being acquired.

On tax, the Internal Revenue Service separates deduction from basis. IRS Publication 530, for 2025 returns, says title insurance is not deductible, and that owner's title insurance is added to the basis of the home. IRS Publication 523 lists owner's title insurance among the settlement costs added to basis, alongside abstract fees, legal fees, recording fees, surveys and transfer taxes. Basis is the figure from which a gain is measured when the home is later sold, so the owner's premium paid at closing counts towards it.

A title premium is paid once, but the policy it buys is decided earlier: by which policy is ordered, in which state, and from a provider chosen by whom.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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