What does title insurance cover when you buy a house in Virginia, and do you need it?

What is title insurance, in plain English?

Title insurance covers a risk that has already happened but has not shown up yet. When you buy a house, someone searches the public record to confirm who owns it and whether anything is attached to it. That search is thorough, but records can have errors, and some problems stay hidden until later.

If a covered problem appears after closing, the policy is what pays to defend your ownership or to cover the loss, up to the policy amount.

That is different from most insurance. Homeowners insurance is about what might happen to the house in the future. Title insurance is about what might already be wrong with the paper trail.

What kinds of problems can it cover?

Typical examples include an unpaid lien from a previous owner, an error in how a deed was recorded, a missed heir with a claim to the property, or a forged signature somewhere in the chain of ownership.

These are uncommon, which is why the search comes first. But when one of them does appear, it can be expensive and slow to fix, and it falls on whoever owns the home at that moment.

Every policy has exceptions, which are specific items it does not cover. Your settlement agent should give you a title commitment before closing that lists them. Read that document, even though it is dull, and ask what each exception means for you. It is the part that tells you what you are actually buying.

Do I need both a lender’s policy and an owner’s policy?

They are two different policies that protect two different parties.

The lender’s policy protects the bank’s interest in the property up to the loan amount. If you finance, the lender will usually require it, and you pay for it as part of closing costs. It does nothing for you if your ownership is challenged.

The owner’s policy protects you, for as long as you or your heirs own the property. It is generally optional. Many buyers choose to purchase it because the premium is a one-time cost and the risk it covers, however small, is large for most households. Others skip it. That is a personal decision and I would not tell you that one answer is right for everyone.

If you want to decide with confidence, ask your settlement agent for the premium and for the coverage summary, and ask your lender whether anything about your loan changes the picture. A Virginia real estate attorney can answer the legal questions.

Who picks the settlement company, and what should I ask?

In most Virginia purchases the buyer chooses the settlement company, subject to what the lender requires. Your agent may suggest a few, but you are not obligated to use any of them.

Ask each company the same questions. What is the total settlement cost, and what is the title insurance premium within it? Can you see a title commitment early? How do they handle wire instructions, since wire fraud is a real risk at closing? Who will be at the table, and how do they communicate if a problem turns up?

Verify wire instructions by calling a phone number you already know to be correct, never one from an email. That one step prevents one of the most expensive mistakes buyers make.

Our post on what happens at a Virginia closing walks through the day itself, and our final walkthrough checklist covers the week before.

What should I do next?

Before you make an offer, ask your lender and agent what a typical settlement looks like in your price range, so the title line is not a surprise. If you are starting your search, our team in the Glen Allen office can walk you through the closing costs you should expect on a purchase. You can begin on our buyer page or contact Daniel Keeton. For legal questions about your specific title, talk with a Virginia real estate attorney.