Title Insurance in Texas: The One Policy the State Prices for You

Title insurance is the line on a Texas settlement statement that people most want to negotiate and the one that is least negotiable, because the state sets the price.

Which is good news, in a way. It means the shopping question has a simple answer, and it frees you to pay attention to the part that actually matters, which is the title commitment nobody reads.

The State Sets the Premium

Texas is one of a small number of states where the Department of Insurance promulgates title insurance rates by rule. The premium for a given policy amount is the same at every title company in Texas.

So if someone tells you they can get you cheaper title insurance in Texas, one of two things is true: they are confused, or they are talking about a different line item. There is no discount to find on the premium itself.

One genuine saving does exist and it is worth asking about: when the owner’s and lender’s policies are issued simultaneously, the lender’s policy is issued at a substantially reduced rate. That is why the customary allocation in North Texas, seller pays owner’s and buyer pays lender’s, works out cheaply for the buyer.

What You Should Actually Shop

Four things vary between title companies, and together they are worth a few hundred dollars:

• The escrow or closing fee.The company’s charge for handling the closing. Customarily split between buyer and seller in North Texas.
• Document preparation, courier and recording service charges. Small individually, noticeable together.
• Endorsement pricing.Add-ons to the lender’s policy.
• The quality of the escrow officer. This is not a fee and it is the one that will actually affect your closing. A responsive, experienced officer who catches a problem in week two rather than on closing day is worth far more than any fee difference.

That last point is not a platitude. Title companies handle the funds, the payoff, the recording and the disbursement, and a slow one turns a clean transaction into a stressful one. What actually happens at closing.

Two Policies, Two Beneficiaries

People frequently believe they are covered when only the bank is.

• The lender’s policyprotects the lender, up to the loan amount, and it declines as you pay the loan down. It protects the bank’s lien position. It does nothing for you.
• The owner’s policy protects your equity, up to the purchase price, for as long as you own the property, and in some circumstances afterward. It is the one that matters to you.

Because the seller customarily pays for the owner’s policy in North Texas, most buyers get it without thinking about it. On new construction, on a for-sale-by-owner purchase, or wherever the custom is being renegotiated, check that it is actually being issued. Buying a house with only a lender’s policy is a real and avoidable exposure.

What It Covers, and What It Does Not

The mental model that helps: every other insurance policy you own protects against the future. Title insurance protects against the past.

Covered: defects in the chain of ownership that existed before you bought. Undisclosed heirs with a claim. Forged instruments in the record. Recording errors. Unpaid liens from a previous owner. Improperly executed documents. Claims that surface years later out of paperwork done decades ago.

Not covered: anything arising after you take title, anything you agreed to accept, and anything listed as an exception in the policy. Which is why the exceptions are the part to read.

Read the Title Commitment, Not Just the Bill

The title commitment arrives during your option period. It is the document that tells you what the policy will and will not cover, and it is structured in schedules.

Schedule B is where you find the easements, the deed restrictions, the mineral reservations and the rights of way that come with the property. Some are entirely ordinary. Some are not: a utility easement running through the part of the yard where you intended to build a pool is the sort of thing that appears here and nowhere else.

Mineral reservations deserve a specific mention in Texas, where surface and mineral estates are commonly severed. Knowing whether you own what is under your land, and what rights the mineral owner has to reach it, is a Schedule B question.

Paragraph 6D of the contract gives you a right to object to title matters, and it is waived by silence. Read the commitment when it arrives, not the week of closing. Every deadline that lapses this way.

The Endorsements Worth Understanding

Two come up in nearly every North Texas residential transaction:

• Survey deletion, sometimes called survey amendment. By default the policy excepts any matter an accurate survey would disclose. This endorsement narrows that exception so more of what a survey would have shown is covered. It requires an acceptable survey, which is one of several reasons the survey question is not a formality. The survey and the T-47.
• The T-19 restrictions, encroachments and minerals endorsement. Extends coverage around deed restriction violations, encroachments and mineral development. Commonly required by lenders and generally inexpensive relative to what it addresses.

Both are priced as a small percentage of the premium. Ask what each costs and what it changes rather than accepting or declining them by default, and remember that endorsements on the lender’s policy protect the lender. If you want the equivalent protection for yourself, ask whether it can be added to the owner’s policy.