What Is Title Insurance?
Title insurance is a one-time policy purchased at closing that protects the buyer (and their lender) against problems with the property’s ownership history. Unlike other insurance that protects against future events, title insurance protects against past events — things that happened before you bought the property that could affect your ownership.
It’s customary in Texas for the seller to pay for the owner’s title insurance policy — but customs aren’t laws. The owner’s policy protects the buyer, and who pays for it is negotiable in the contract. A good listing agent will always work to push this cost to the buyer’s side.
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▼How Title Insurance Works
Before closing, the title company performs a title search — they review the public records to trace the property’s ownership history and identify any liens, encumbrances, or defects. The results come back in a title commitment, which is essentially a report of what they found.
The title insurance policy is issued at closing based on that title search. It guarantees that if something was missed — a lien that didn’t show up, a forged signature in the chain of ownership, an heir who wasn’t accounted for — the title insurance company will either fix the problem or compensate the insured party.
Owner’s Policy vs Lender’s Policy
There are two types of title insurance in every financed transaction:
Owner’s policy. Protects the buyer’s ownership interest. Stays in effect for as long as the buyer (or their heirs) own the property. Custom in Texas is for the seller to pay for this, but it’s negotiable — and since the policy protects the buyer, not the seller, there’s a reasonable argument that the buyer should pay for it. At Creekstone, we always try to negotiate this cost to the buyer’s side.
Lender’s policy. Protects the mortgage lender’s interest. Required by the lender as a condition of the loan. The buyer typically pays for this. The coverage amount decreases as the loan is paid down and expires when the mortgage is paid off.
If the buyer is paying cash, there’s no lender’s policy — but an owner’s policy is still a good idea.
What Title Insurance Covers
Title insurance protects against defects that existed before closing, including:
- Unknown liens — unpaid taxes, contractor liens, judgment liens that didn’t show up in the title search
- Ownership disputes — someone claims they have a right to the property that wasn’t disclosed
- Errors in public records — clerical mistakes in deeds, mortgages, or court records
- Forgery — a forged signature somewhere in the chain of title
- Missing heirs — an heir who wasn’t included in a probate that should have been
- Undisclosed encumbrances — easements, restrictions, or other claims that affect the property
The Survey Exception Amendment (Paragraph 6.A.8.ii)
One detail worth knowing about: the TREC 1-4 Family Residential Resale Contract includes a checkbox in paragraph 6.A.(8) about the standard survey exception. By default, the title policy excludes coverage for boundary disputes, encroachments, and shortages in area. But if you check box (ii), that exception gets narrowed to “shortages in area” only — meaning the policy now covers boundary lines, encroachments, and overlapping improvements.
There’s a small additional premium for this amendment, and the contract lets you assign the cost to either the buyer or the seller. It’s not a lot of money, but it’s meaningful coverage — especially on properties where fences, driveways, or structures sit near a property line.
What Title Insurance Doesn’t Cover
Title insurance doesn’t cover everything. Common exclusions include:
- Issues the buyer knew about before closing
- Environmental contamination
- Zoning violations
- Government regulations enacted after the policy date
- Problems that arise after closing (that’s what homeowner’s insurance is for)
Title Insurance Rates in Texas
Title insurance rates in Texas are regulated by the Texas Department of Insurance. Every title company charges the same base rate — you can’t shop for a cheaper premium. The rate is based on the sale price of the property.
What you can shop for is the title company’s service, fees, and closing experience. The title insurance premium itself is fixed, but the ancillary fees (escrow fees, document prep, courier charges) vary by company.
Why Sellers Should Care
As the seller, you’re paying for the owner’s policy — so why should you care about it beyond the cost?
Because title issues can delay or kill your closing. If the title search reveals a problem — an old lien, a missing release, a boundary dispute — it has to be resolved before the title company will issue the policy and close the transaction. The sooner you know about potential issues, the sooner they can be addressed.
If you’re aware of anything in your property’s history that might affect title — a previous lien, a boundary agreement with a neighbor, an easement — mention it early. Surprises during the title search slow everything down.
Selling for 1% — Title Insurance Still Included
Regardless of what you pay in listing commission, the title insurance cost is the same. At Creekstone, our 1% listing fee doesn’t change anything about the title process — the title company, the policy, and the closing all work exactly the same way.
The difference is you’re saving thousands on the listing commission, which offsets the title insurance cost and then some.
See our 1% listing details or get a free market analysis.
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Frequently Asked Questions
Who pays for title insurance in Texas?
Custom in Texas is for the seller to pay for the owner's policy and the buyer to pay for the lender's policy. But it's negotiable — and since the owner's policy protects the buyer, there's a strong case for the buyer to pay for it. A good listing agent will always work to negotiate this on your behalf.
How much does title insurance cost in Texas?
Title insurance rates in Texas are set by the Texas Department of Insurance and are the same regardless of which title company you use. On a $400,000 home, the owner's policy runs about $2,500. The rate is based on the sale price.
What does title insurance cover?
Title insurance protects against ownership claims, undisclosed liens, errors in public records, forgery, and other defects in the title that existed before closing but weren't discovered during the title search.
Do I need title insurance if I'm paying cash?
A lender's policy is only required when financing. An owner's policy is optional but strongly recommended regardless of how you're paying. It protects you against title defects that may not surface until years after closing.
