What Is Title Insurance?
Title insurance protects property owners and mortgage lenders against financial losses arising from defects in a property's title — problems with the chain of ownership that existed before the purchase but may not have been discovered.
Unlike almost every other type of insurance, which protects against future events, title insurance primarily protects against past events — hidden defects, fraud, errors, and omissions that occurred in the property's history before you purchased it.
Every piece of real estate has a "chain of title" — a documented history of every owner and every transaction affecting the property, recorded in the county recorder's office. A title search reviews this chain to find all recorded liens, mortgages, easements, and judgments. Title insurance covers what the title search might miss — including fraud, forgery, hidden heirs, and clerical errors in historical records.
Owner's vs. Lender's Policy
Owner's Policy
- Protects YOU, the buyer
- Optional — your choice
- One-time premium at closing
- Coverage lasts as long as you own the property
- Covers full purchase price of the home
- Also protects heirs who inherit from you
Typical cost: $1,000–$2,500 (varies by purchase price)
Lender's Policy
- Protects your MORTGAGE LENDER
- Required for financed purchases
- One-time premium at closing
- Coverage expires when loan is paid off or refinanced
- Covers loan amount (not full purchase price)
- Does not protect you at all
Typical cost: $500–$1,500 (varies by loan amount)
The critical distinction:
The lender's policy protects the bank — not you. If a title defect emerges, the lender can file a claim and be made whole. You, as the property owner, may lose the property with no compensation unless you have an owner's policy. The lender's required policy does nothing for the buyer.
What Title Insurance Covers
Title insurance covers "covered risks" — events that occurred in the property's past that may not appear in a standard title search. Standard covered risks include:
What Title Insurance Does Not Cover
Title insurance does not cover everything. These are NOT covered under a standard owner's policy:
Physical condition of the property is covered by your home inspection contingency and homeowner's insurance — not title insurance. Government actions (zoning changes, eminent domain, environmental regulations) are also outside the scope of title protection.
Cost in Illinois
Title insurance premiums in Illinois are regulated by the state and are based on the purchase price (for owner's policy) or loan amount (for lender's policy). Typical premiums:
| Purchase Price | Owner's Policy (est.) | Lender's Policy (on 80% LTV loan) |
|---|---|---|
| $250,000 | $1,250–$1,750 | $750–$1,000 |
| $400,000 | $1,800–$2,400 | $1,000–$1,400 |
| $600,000 | $2,400–$3,200 | $1,300–$1,800 |
| $1,000,000 | $3,500–$5,000 | $2,000–$3,000 |
Covered or Not Covered? Quiz
Test your understanding. For each scenario, guess whether a standard owner's title insurance policy would cover the loss:
A mortgage that the seller paid off but was never released from the records
A basement that floods every spring because of drainage issues
An heir of a prior owner claims they were left out of the estate
The HOA increases monthly dues after you purchase
A survey error placed the boundary line incorrectly in the chain of title
Frequently Asked Questions
Questions About Your Title Insurance Coverage?
Illinois Estate Law reviews title commitments for buyers and sellers — including Schedule B exceptions — to ensure you understand exactly what your title insurance will and will not cover before you close.
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