Title insurance
Title insurance covers losses from defects in ownership that existed before the policy was issued and were not discovered by the title search.
It is the opposite of most insurance. Other policies cover things that might happen; this one covers things that already have, and that nobody knew about.
What a search cannot find#
Title examination reads the public record. Several categories of defect are not in it.
Forgery. A deed in the chain signed by someone other than the owner.
Undisclosed heirs. Somebody with an inherited interest nobody knew existed — which, given how much Minnesota property passes without probate, is not hypothetical.
Marital interests never disclosed, where a spouse's interest was required and not obtained.
Indexing errors. A recorded document filed against the wrong name or the wrong parcel is effectively invisible to a name-based search.
Capacity problems. A conveyance signed by someone without authority — a personal representative without letters, an officer without corporate authority.
Defects in decades-old conveyances that were never noticed.
Two separate policies#
The distinction that costs buyers money.
A lender's policy protects the lender, in the amount of the loan, decreasing as the loan is paid. It is required, and the buyer usually pays for it.
An owner's policy protects the buyer, in the amount of the purchase price, for as long as they hold an interest. It is optional and it is a separate purchase.
A buyer who declines the owner's policy has paid for insurance that covers somebody else. That is a genuinely common outcome, because the lender's policy is mandatory and appears on the settlement statement while the owner's is presented as an extra.
Paid once#
The premium is a single payment at closing rather than an annual one, because the risk is fixed at that moment — everything the policy covers had already happened.
Where a property is resold or refinanced within a few years, a reissue rate is frequently available and rarely offered unprompted. Asking is worth doing.
What it does not cover#
Defects arising after the policy date. A judgment lien recorded next year, an easement granted afterwards, a boundary problem created by something the owner does.
And the exceptions listed in the policy, which are the specific matters the insurer has declined to cover — usually because the search found them and the parties chose to accept them.
Reading the exceptions is the part everyone skips. They are the list of things the insurer already knows about and will not pay for.
On distressed property#
Where it matters most.
Foreclosure, probate and tax-forfeited purchases run on limited-warranty and authority-based conveyances that promise very little. Chains of title on long-neglected property are frequently interrupted.
The weaker the deed and the messier the history, the more an owner's policy is carrying — which is why declining it on exactly these purchases is the wrong economy.