What Texas Title Insurance Does

Texas title insurance provides the insured, i.e., the buyer or lender, legal and financial protection against risks unknown at the time a buyer purchases a property or a lender takes a mortgage against it. Any unknown risks could potentially lead to loss of title to the property and/or a significant financial loss.

In exchange for the one-time premium paid at closing, a Texas title insurance policy requires the title insurance company to defend the insured against lawsuits involving title to a property, the establishment of an interest in a property, or the enforcement of an encumbrance against a property. Further a Texas title insurance policy requires the title insurance company to indemnify the insured by either clearing up any title problems or paying the insured's losses. Even though the title insurance premium is paid only once at closing, the buyer's Texas title insurance policy remains in effect as long as the insured, or the insured's heirs, retain an interest in the property, or have any obligations under a warranty in any conveyance of it.

Examples of unknown risks that cause a loss of title or create an encumbrance of title are: forged or missing documents, mistakes in recording legal documents, and liens for unpaid estate, inheritance, income, or gift taxes.

Finally, a Texas title insurance policy insures the buyer or lender against mistakes made by the title company in the settlement of the purchase or refinance transaction. For example, should the title company fail to pay the seller's property taxes owed at the time of closing with funds collected for such purposes in the escrow account, the Texas title insurance policy will protect the buyer.