Title insurance protects California real estate buyers from financial losses caused by defects in the legal ownership of a property. Even after a title company completes a public records search before closing, certain problems may not be discovered until after the sale is final. Understanding what a title insurance policy covers – and what it does not – can help buyers make more informed decisions during the escrow process.
Two types of title insurance policies in California
In California real estate transactions, two separate title insurance policies are commonly issued at closing. A lender’s policy covers the mortgage lender’s financial interest in the property up to the loan amount. The buyer receives no protection under this policy.
Buyers receive coverage for their equity and legal ownership rights through a separate title policy issued in their name. In California, the seller typically pays for this type of policy as part of the closing costs, though this is negotiable. They should confirm during escrow whether someone is arranging this coverage for them and what it includes.
What a standard title insurance policy typically covers
Basic policies in California often provide protection against common problems that might threaten legal ownership. These policies may cover losses from forged deeds or unknown heirs claiming an interest in the land.
- Forged deeds or fraud
- Errors in public records or indexing
- Unknown heirs or missing spouses
- No legal right of access
- Liens from taxes or contractors
These tools help buyers avoid the high costs of defending their rights in court.
Limitations and policy exclusions
A standard title insurance policy excludes known defects you accepted, zoning issues, natural hazard damage and most boundary disputes. Review your preliminary title report before closing. It lists every item your policy will not cover. Make sure you have an owner’s policy, not just a lender’s policy. If you find an exclusion you did not expect, a real estate attorney in Santa Ana can help.