What Is Title Insurance in New York, and Do You Need the Owner's Policy?

Title insurance can be one of the larger closing costs in a New York home purchase, yet many buyers do not learn what it covers until they review the final numbers. It is not homeowner's insurance. It does not protect against fire, flooding, or theft. What it protects against is a problem in the property's ownership history that could surface after closing and challenge your right to the property.

The lender's policy protects the bank. The owner's policy protects the buyer. Confusing the two can leave a buyer paying for insurance without realizing that the required policy does not actually insure their ownership.

A Title Search and a Title Policy Are Not the Same Thing

When title insurance is ordered for a New York residential purchase, the title company examines or arranges an examination of the public records. The search traces the chain of ownership, looks for open liens, checks for unpaid taxes and judgments, and identifies encumbrances attached to the property. The search may identify mortgages, tax liens, judgments, easements, restrictions, or other matters that must be resolved, accepted, or listed as exceptions before the policy is issued.

The search identifies problems that can be addressed before closing. The policy provides protection against specified title risks that remain after the search, subject to the exclusions and exceptions in the final policy. Those risks can include a forged deed in the prior chain of title, a deed signed by someone who lacked legal authority, a recording or indexing error in the county records, an undisclosed heir asserting an ownership interest, a document that was improperly executed, or a title defect that arose in the gap between closing and recording.

For a covered claim, the insurer may provide a legal defense, cure or settle the title problem, or compensate the insured for a covered loss, subject to the policy's terms and limits. Title insurance primarily addresses title problems rooted in events that occurred before the policy date, though the approved policy includes limited coverage for certain risks involving the period after the policy date and before the deed is recorded.

The Required Policy Protects the Lender

A financed residential purchase commonly involves two title insurance policies: the lender's policy and the owner's policy. They cover different interests and serve different purposes.

The lender's policy, also called a loan policy, protects the mortgage lender's interest in the property up to the amount of the loan. If you are financing your purchase, your lender will require this policy as a condition of the mortgage. The lender's policy protects the lender, not you, and its coverage declines as the loan balance is paid down. When the mortgage is paid off, the lender's policy terminates.

The owner's policy protects your interest in the property up to the purchase price. It does not decline over time. It remains in effect for as long as you or your heirs hold an interest in the property. If a covered title defect surfaces years after closing, the policy may provide a defense, help resolve the defect, or compensate the owner for a covered loss, subject to its terms and limits.

The owner’s policy is technically optional in New York. Declining it leaves the buyer without title coverage for their ownership interest. A buyer who declines the owner’s policy and later faces a title claim cannot turn to that policy for a defense, resolution of the defect, or payment of a covered loss.

New York Regulates the Base Premium

New York is a rate-regulated state for title insurance. TIRSA develops and files rates and forms for its members, subject to approval by the New York Department of Financial Services. TIRSA issued its seventh revision of the rate manual, effective October 1, 2024. Title companies in New York must charge the rates filed with the DFS, either the standard TIRSA schedule or an approved deviation filing. The filed base premium is generally not negotiable, although search, recording, endorsement, and transaction-specific charges may vary with the work required.

One common reduction applies when the owner's and lender's policies are issued simultaneously. When a title company issues both policies at the same closing, the portion of the loan policy that does not exceed the owner's policy amount is calculated at 30% of the applicable loan rate rather than the full rate. The simultaneous-issue rate reduces the additional premium charged for the lender’s policy when both policies cover the same property.

Premium amounts are calculated on a per-thousand basis: against the purchase price for the owner's policy and against the loan amount for the lender's policy. The exact figures depend on the purchase price, the loan amount, and which rate tiers apply. These are one-time premiums paid at closing, not ongoing fees. A title company or real estate attorney can provide exact figures for a specific transaction.

New York Buyers Generally Pay for Both Policies

The New York Department of Financial Services states that the home buyer is generally responsible for paying for both the owner's policy and the lender's policy. A seller may agree to contribute toward a buyer's closing costs, but that is a negotiated contract term, not a default allocation under New York law or regulation.

Buyers should confirm what is included in their closing cost estimate early in the process. Title insurance premiums are a significant line item, and understanding whether the seller has agreed to contribute, and to which policy, affects how buyers plan for the funds they will need at closing.

Read the Exceptions, Not Just the Coverage Amount

Title insurance and homeowners insurance protect against entirely different risks. Title insurance does not cover physical damage to the property, and homeowners insurance does not cover defects in ownership history. The two policies work in parallel, not as substitutes.

Title insurance generally does not insure compliance with building and zoning laws, although the policy contains limited coverage for certain recorded enforcement notices and specified governmental actions. Physical damage to the property is excluded. Defects, liens, and other matters created after the policy date are generally excluded unless the policy or an endorsement provides applicable post-policy coverage.

Easements, encroachments, boundary conditions, and other survey matters may be excluded or specifically listed as exceptions in Schedule B of the final policy, depending on the title and survey review. A matter specifically excepted from coverage in Schedule B is generally not insured unless the title company removes the exception or provides applicable affirmative coverage.

Coverage may also be excluded when the buyer actually knew about a title problem, failed to disclose it, and the title company neither knew about it nor could discover it in the public records. The exclusion concerns what the buyer actually knew, not merely what the public records might have revealed.

The policy itself is the controlling document. Before closing, buyers should review the title report or commitment and the proposed exceptions with their attorney. Once the owner’s policy is issued, they should confirm that its coverage and Schedule B exceptions match what was approved for the closing.

How the Title Company and Your Attorney Work Together

In a New York residential closing, the title company and the buyer's attorney work in parallel throughout the transaction. The title company conducts the search, flags issues before closing, issues the title commitment, and ultimately issues the policies. The buyer's attorney reviews the commitment and the search results, raises title objections, and confirms how identified issues will be cleared, excepted, or otherwise handled before closing.

Taub & Bogaty, PLLC works with CTC Title Agency, which was founded by Taub & Bogaty partner Josh Bogaty. CTC Title Agency is a title insurance agency based in Hauppauge that coordinates title searches and title insurance for residential transactions throughout Long Island and New York State.

If you are buying or selling a home on Long Island and want to understand what your title insurance covers and what it costs, call Taub & Bogaty, PLLC at (516) 531-2500 or contact us at realestatelawny.com/contact.