Title Insurance: Who Pays, Buyer or Seller?

What title insurance actually protects against

Unlike most insurance, which covers future events, title insurance covers past events you didn't know about — defects in the chain of ownership that existed before you took title but only come to light afterward. Examples:

• An unreleased lien from a prior owner's mortgage or contractor
• A forged deed in the property's chain of title
• An unknown heir with a claim to the property
• Errors or omissions in the public records or the title search
• Easements or restrictions that weren't disclosed
• Fraud or undue influence in a prior conveyance

The title company runs a search before closing, and the insurance covers what the search misses or can't find. It's a one-time premium paid at closing — not an annual policy — and it lasts as long as the insured party (the lender for a lender's policy, the owner and their heirs for an owner's policy) holds an interest in the property.

The two policies, and the price gap between them

Lender's policy (loan policy)

A lender's policy protects the lender's interest in the property up to the loan amount. Virtually every mortgage lender requires one. The buyer pays it (or rolls it into their loan), and it's typically a few hundred dollars — $200 to $600 in most markets. The policy decreases as the loan balance is paid down, and it ends when the loan is paid off.

Owner's policy

An owner's policy protects the buyer's equity in the property up to the full purchase price. It's the larger of the two policies, and it's optional almost everywhere. But it's also the only thing standing between the buyer and a personal loss if a title defect surfaces after closing — the lender's policy protects the lender, not the buyer.

The owner's policy is typically the line on the settlement statement that gets debated, because the dollar amount is meaningful and the custom for who pays varies by state.

Who customarily pays the owner's policy

States split roughly into three camps:

• Seller customarily pays. A large share of the country, including most of the Midwest and South — Florida (in most counties), Texas, Ohio, much of Pennsylvania, and others. The seller buying the owner's policy is treated as part of delivering "clean title" to the buyer.
• Buyer customarily pays. Common in much of the Northeast and parts of the Mountain West. The buyer is paying for protection of their own equity, so they pay for the policy.
• Split or negotiable. Some states have no strong custom or vary heavily by county. In a handful of large metropolitan areas — Northern vs. Southern California is the classic example — the custom flips at the county line.

Custom is not law. Who pays the owner's policy is a contract term that gets negotiated alongside the price. In a buyer's market, sellers in buyer-pays states sometimes agree to pick it up as a concession; in a seller's market, the reverse.

Our state pages spell out the customary split where you're selling. Compare a seller-pays state like Florida with a buyer-pays state like New York and the title line on the seller's net sheet looks very different.

How much does it cost?

Owner's policy premiums are usually quoted per $1,000 of sale price and run roughly:

• $3 to $7 per $1,000 in most low-to-moderate-cost states
• $5 to $8 per $1,000 in higher-cost states
• Higher still in a handful of states with elevated regulated rates

On a $400,000 sale, that works out to roughly $1,500 to $3,000 for the owner's policy in most markets. The lender's policy runs another few hundred dollars, often discounted when issued simultaneously with the owner's policy.

Some states regulate rates (so every title company charges the same — no shopping benefit). Others let title companies set their own. In competitive markets a few hundred dollars of savings is common from shopping around.

Endorsements and extras

Beyond the base policy, title companies sell endorsements that extend coverage — for example, an enhanced owner's policy that covers post-closing risks (forgery after closing, mechanics' liens from work the prior owner authorized but didn't disclose). These cost extra and are worth asking about, especially for new construction or extensively renovated properties.

How title insurance fits in your seller closing costs

If you're in a state where the seller customarily pays the owner's policy, expect it to be one of your top three closing-cost lines — often second only to commission and transfer tax. If you're in a buyer-pays state, you'll typically only see the smaller settlement and recording fees on your side of the statement. Our home seller net proceeds calculator wires in the right default for your state automatically. For the bigger picture of every other line item, our companion guides on seller closing costs and who pays closing costs, buyer or seller cover the rest of the settlement statement.

One thing not to skip

If you're the seller, this isn't really a "should I get it" question — the buyer makes that call for the owner's policy. But if you ever buy again, get the owner's policy. The premium is small relative to your equity, the coverage is for life, and the downside of skipping it is the kind of loss that's nearly impossible to recover from in court. It is the cheapest large insurance policy you'll ever buy.