Most people pay for title insurance once, at closing, and never think about it again — until something goes wrong and they find out what their policy does and doesn't cover. The short version: title insurance protects your ownership against problems that existed before you bought the property. It is not a home warranty, it doesn't cover the condition of the house, and the policy itself spells out a list of things it won't pay for. Here's how to read that line between covered and not covered, and what to do if you ever need to make a claim.
The one-sentence version
Title insurance covers hidden problems with who owns the property and what's attached to it — problems that were already there on the day you closed. It does not cover the physical house, things that happen after closing, or problems that were disclosed to you in writing before you closed.
What a standard owner's policy covers
The exact wording comes from the policy form your title company issues, but an owner's policy generally protects you against loss from things like:
- Forgery and fraud — a forged deed or signature somewhere in the chain of title, or someone who sold the property without the right to sell it
- Liens that weren't paid off — an old mortgage, judgment, tax lien, or HOA lien that should have been cleared at a prior sale
- Undisclosed heirs or owners — a spouse, heir, or co-owner who claims an interest after you close
- Recording and clerical errors — a deed recorded wrong, a bad legal description, or a document indexed incorrectly
- Defective documents — a deed signed by someone without legal capacity or authority (for example, a bad power of attorney or an LLC signer who wasn't authorized)
- Lack of legal access — no legal right to get to the property
- Unmarketable title — a defect that would stop you from selling or refinancing
It also pays to defend your title in court if someone sues over a covered matter. For a lot of claims, the legal defense is worth more than the check.
What it doesn't cover
This is the part people skip. There are two places the policy carves things out: exclusions (built into every policy) and exceptions (specific to your property, listed on Schedule B).
Exclusions — on every policy
- Zoning, building codes, and other government regulations — unless a notice of the violation was recorded in the public records before your policy date
- Things you created or agreed to — a lien you put on the property, an easement you granted, a problem you caused
- Things you knew about and didn't disclose to the title company
- Problems that start after closing — a new contractor lien for work you hired, a neighbor's new fence dispute, a lien from a judgment against you
- Government taking (eminent domain) that wasn't recorded before closing
Exceptions — specific to your file
Schedule B lists the recorded items on your property that the policy won't insure against: recorded easements, covenants and HOA declarations, metro district documents, mineral reservations, and taxes not yet due. These aren't hidden — they're named in your title commitment before closing, which is why it's worth reading it. (Here's how to read a Colorado title commitment.)
A standard owner's policy also includes standard exceptions for things the public record won't show: parties in possession, unrecorded easements, boundary and survey matters, and unrecorded mechanic's liens. In Colorado, many of those can be removed with owner's extended coverage, usually with an affidavit from the seller and, for survey matters, an ILC or survey (ILC vs. survey explained).
Covered vs. not covered — quick reference
| Situation | Covered by owner's policy? |
|---|---|
| Forged deed from a prior owner surfaces after you close | Yes |
| Old judgment lien against a prior owner wasn't paid off | Yes |
| An heir of a prior owner claims an interest in the home | Yes |
| Recorded utility easement listed on Schedule B | No — it was excepted |
| HOA covenants restrict what you can build | No — recorded and excepted |
| Neighbor's fence is 3 feet onto your lot | Depends — standard policy excepts survey matters; extended coverage may not |
| Contractor you hired files a lien after closing | No — arose after closing |
| Basement addition was never permitted | Generally no — building/zoning issue |
| Roof leaks, foundation cracks, bad sewer line | No — that's inspection and home warranty territory |
How much it pays
An owner's policy is written for the purchase price. That's the cap. If you buy at $450,000 and the home is worth $600,000 ten years later, a standard policy is still written at $450,000 — it doesn't grow with appreciation. Some underwriters offer an enhanced homeowner's policy with extra coverage items, so if that matters to you, ask your title company before closing what's available on your file and what it costs.
Coverage lasts as long as you or your heirs own the property, and in some cases continues after you sell if you're sued over the warranties in your deed. One premium at closing, no renewals. (More on that here: Is title insurance a one-time cost?)
If you think you have a claim
- Find your policy. It's usually mailed or emailed after closing. If you can't find it, the title company that closed your file can tell you the policy number and underwriter.
- Give written notice quickly. The policy's conditions explain where to send it. Waiting can hurt you — if the delay makes the problem worse, it can reduce what the insurer owes.
- Send what you have. The lawsuit, demand letter, lien, or recorded document that started this, plus your closing documents.
- Don't settle on your own. Paying off a claimant or signing an agreement without the insurer's consent can jeopardize coverage.
Once a claim is accepted, the insurer can fix the problem (clear the lien, get a corrective deed), defend you in court, or pay your loss up to the policy amount.
Where title insurance is different from other insurance
Car and home insurance mostly pay for things that happen in the future. Title insurance works the other way: most of the work happens before closing. The search, examination, and curative work are meant to find and fix problems up front so a claim never happens. The policy is the backstop for what a search can't catch — forgery, fraud, a missing heir, an error buried in a decades-old document.
Frequently asked questions
Does title insurance cover wire fraud?
Not as a title claim. Wire fraud is money sent to the wrong place, not a defect in ownership. Seller impersonation fraud on the title side is a different story. Here's a full breakdown: Wire fraud and fake sellers in Colorado. The best protection for wires is to call the title company at a number you already know before sending money.Does title insurance cover boundary disputes?
Under a standard owner's policy, survey and boundary matters are generally excepted. Owner's extended coverage can remove that exception, usually with an ILC or survey. If boundaries matter on your property — acreage, fences, outbuildings — ask about extended coverage before closing.Is my lender's policy covering me too?
No. The lender's policy protects the lender up to the loan balance. Your equity is only protected by an owner's policy. See owner's vs. lender's title policy.Does title insurance cover unpermitted work or code violations?
Generally no. Zoning and building code issues fall under the government regulation exclusion unless a notice of violation was recorded before your policy date. That's an inspection, permit history, and disclosure question.What if I refinance — does my owner's policy go away?
No. Your owner's policy stays in force as long as you own the home. A refinance requires a new lender's policy for the new lender, not a new owner's policy.Every policy is a contract with its own wording, so the actual policy on your property controls. If you've got a question about what your policy covers, or a situation you're not sure about, reach out to Ben Gosz at Chicago Title of Colorado — happy to look at it with you.