Exactly what is title insurance? The title insurance policy is a contract between the owner of a parcel of land and the title company, which guarantees the owner a particular set of facts concerning the land described.  The primary facts insured are described below: That the homeowner is in fact the owner of the land described and his title is good against every other claim except as stated in the policy. That the title to the land insured is clear of all encumbrances to the title, such as mortgages or liens, servitudes, easements, restrictions, oil and gas leases, outstanding mineral interests or leases for other uses of the land, including pasture leases, crop leases of other tenancies of third parties, except as stated in the policy. That all property taxes (including state ad valorem, city and school taxes) have been paid against the subject property, except for the year in which the property is purchased and subsequent years. The most requested policies are: Owners Title Policy: Protects the owner of the property while he/she is the owner and after the property is sold.  The policy will be issued in the amount of the current sales price.  If there is no sale, the policy must be issued for the fair market value of the property. Mortgagee Title Policy: Protects lenders from loss if it is determined that its lien is not valid or is inferior to another lien not shown as an exception to coverage on the policy.  The policy will be issued in an amount equal to the current outstanding loan balance. Title insurance is different from other insurance in that it insures against events that happened in the past that effect title to the property.  Other types of insurance protect against events in the future. How does a title company determine if it will insure the property? Before issuing a title policy a search is made of the county real property records where the property is located.  This search is done by using the company abstract plant, which maintains references to deeds, mortgages, liens, deaths, divorces, etc., which might affect the property. The title company examines these instruments and the results of the examination determine whether the title company will issue a policy and what exceptions to coverage will be taken in the policy.  The search and the commitment are not representations as to title but are done for title insuring purposes.  Title insurance is not intended for titles known to be bad or defective. Why buy a title policy if an attorney has carefully searched the records and title is found to be good? There are many hidden defects, which may affect title to real estate.  Some examples are: Forgeries Frauds False Representation Lost Wills Mistakes in Descriptions Undisclosed Heirs Clerical Errors Illegal Trust Defects may not appear in the records and may not be picked up by even the most thorough search. What is the cost for title insurance? There is a one-time premium for coverage.  These are no annual renewals.  TITLE INSURANCE RATES ARE FIXED BY THE TEXAS DEPARTMENT OF INSURANCE.  This information is provided to help you understand title insurance.  For exact coverage offered, you must rely on your policy. See [rates] Who pays for the title insurance policy? Customarily, the seller/owner pays for owner policy coverage; however, the payment of the premium is a negotiable matter.  A borrower is usually required to provide the Mortgagee policy to the lender as a part of the loan agreement.  The premium for a Mortgagee policy is normally $100.00 when issued simultaneously with an owner policy. What is a settlement? Protects the parties to the transaction by having a neutral party seeing that their agreement is implemented. Allows the seller to use part of the purchase money to pay his liens and to pass title to the purchaser subject only to the liens agreed to in the sales agreement. Aids in the settlement of multiple property transactions. Aids in a transaction involving a sale and simultaneous release. Enables the real estate broker to devote more time to selling other properties by turning over to the settlement agent the time-consuming details of settlement. Inspires confidence in buyers and seller of real estate that the appropriate documents have been signed and recorded and that taxes and prior liens against the property have been paid.  Assures lenders that the disbursement of their loan proceeds has been properly handled. What is the duty of the Settlement Agent to the parties? A settlement or escrow agent is a neutral third party who disburses funds in accordance with the agreement of the parties. A TITLE INSURANCE POLICY IS A CONTRACT BETWEEN YOU AND US INSURING YOU AGAINST LOSS IN THE EVENT A TITLE DEFECT OCCURS RESULTING FROM A COVERED RISK.