Title insurance protects a property owner or lender against financial loss resulting from defects in a property's title, such as unresolved liens, forgery, missing heirs, or recording errors. Unlike most insurance, which covers future events, title insurance protects against problems that already exist but were not discovered before closing. A title search is typically performed first to identify and clear known issues, and the policy then insures against anything that search may have missed.
Commercial real estate transactions generally involve two types of title insurance: a lender's policy, required by the mortgage holder as a condition of financing, and an owner's policy, which protects the buyer's equity in the property. Because a defective title could jeopardize an entire investment, sponsors typically purchase an owner's policy as a standard part of closing. The one-time premium is paid at closing, and the coverage lasts as long as the owner or their heirs hold an interest in the property.
Further reading: Real Estate Investment Strategies for Accredited Investors in 2026
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