Title insurance

An insurance policy that protects a lender and/or home owner against any loss resulting from a title error or dispute.

Most lenders require that you buy title insurance for them to protect against future problems that might arise with the title (ownership). For example, a long lost relative may show up out of the blue to refute your right to a property, claiming that the property's deed is a forgery.

Depending on where you live, you may have to pay for both your policy and the lender's policy. The cost of the owner's policy is based on the property's purchase price, about $3 to $5 per $1,000.

The cost for the lender's policy is based on the loan amount, about $2 to $3 per $1,000. You pay this one-time fee on your home's closing date.

Title insurance may also cover the charge to oversee closing, conduct the title search and the premium. If you refinance your mortgage, you only have to buy the lender's title insurance. The owner's policy protects you and your heirs until you sell your property.

Premium

Regular payments made on an insurance policy

Insurance companies usually charge an annual premium when you open a home owner’s insurance policy. For example, if you live in an area that is prone to earthquakes or floods, your premium will be higher to offset the extra risk that an insurance company takes.