Title Insurance vs. No Title Insurance: The True Cost of Skipping It on Resale

Title insurance is often one of the least understood costs at closing, and for budget-conscious buyers, it can look like an easy place to cut corners.

After all, if the title search came back clean, why spend extra on insurance you might never need? 

But what seems like a harmless way to save a few hundred dollars upfront can create major, sometimes deal-breaking, headaches when it comes time to sell.

What is title insurance and what does it cover?

Title insurance protects homeowners and lenders from financial loss due to issues with a property’s ownership history. There are two types of title insurance policies: a lender’s policy, which most mortgage lenders require, and an owner’s policy, which covers your ownership of the property. 

Unlike other types of insurance (like home insurance), which guard against future risks, it is about protecting against past problems that weren’t uncovered during the title search, like ownership disputes, unpaid taxes, clerical errors, and more. 

The cost of title insurance varies by state and home’s purchase price, paid once at closing.

Why some buyers skip title insurance

Because the owner’s title policy isn’t legally required, some buyers view it as an unnecessary add-on. If the closing costs already feel high, title insurance can seem like one more expense that won’t pay off.

Budgeting costs

First-time buyers, in particular, may skip title insurance to make their closing costs more manageable. While that can save a few hundred or even a thousand dollars at the outset, it also exposes them to potential liabilities that could far exceed those savings later on.

The title search was clean

A common misconception is that a clean title search guarantees the property is free of problems. But title searches only review existing records. They can’t predict issues caused by human error, missing documents, or future claims.

Relying on the lender’s policy

Another common misunderstanding is assuming that the lender’s title insurance policy also protects the homeowner. 

In fact, it only covers the lender’s financial interest in the property, not yours. Without an owner’s policy, a buyer could be left paying out of pocket if ownership disputes, fraud, or back taxes surface later.

The seller says you don’t need it

Some sellers offer quitclaim deeds or verbal assurances that the title is clear, which can make buyers feel secure enough to skip insurance. 

A quitclaim deed simply transfers whatever ownership interest the seller has. It does not guarantee they had full, uncontested ownership in the first place.

The pitfalls of skipping title insurance

The risks of going without title insurance often don’t appear until years later, usually when the you’re trying to refinance or sell. A title company handling the new transaction will run another search, and if they uncover a defect, the sale can grind to a halt. 

In one real-world case, a couple discovered a lien against a prior owner just weeks after moving in. The lien had been missed during the title search because it was misfiled by the county clerk. Since their title insurance only covered the lender—not them—they were forced to pay $2,000 out of pocket to resolve it.

Situations like this aren’t uncommon, and losses can be even greater.

A title search, no matter how thorough, can’t always uncover every potential problem. Paperwork errors, misfiled liens, or undisclosed heirs can all create ownership disputes years after closing.

Without an owner’s policy, the financial responsibility to resolve those disputes falls entirely on the homeowner.