Buying a home in Tennessee involves more than finding the right property, securing financing, and signing closing documents. You also need to understand how ownership of the property is verified, and what happens if a problem with the title appears after closing.
That is where title insurance comes in.
Title insurance can help protect you from certain financial losses caused by title defects that existed before you purchased the property. Although it is a common part of the closing process, many buyers are unsure about the difference between an owner’s policy and a lender’s policy, whether coverage is required, and what they should review before signing.
Here is what you should know before purchasing a home in Tennessee.
What is title insurance?
Title insurance is a type of insurance that protects against covered problems involving ownership or legal interests in real estate. These problems may have originated years before your purchase and may not be discovered during a standard review of public records.
Examples of potential title issues include:
- A previously undisclosed lien
- Unpaid taxes or assessments
- Errors in public records
- Forged or improperly executed documents
- Undisclosed heirs who later claim an interest in the property
- Recording mistakes
- Fraud involving a prior deed
- A dispute over the legal owner of the property
Before a title insurance policy is issued, the title company typically conducts a search and examination of the property’s ownership history. Tennessee law requires a reasonable title search and examination before a title insurance policy or contract may be issued. However, a title search does not guarantee that every possible issue will be found.
Title insurance is designed to provide protection against certain covered defects that existed before the policy date. It generally does not cover problems created after closing, property maintenance issues, or every possible dispute involving the property.
What is the difference between an owner’s policy and a lender’s policy?
Most Tennessee home purchases involving a mortgage include two separate types of title insurance.
Lender’s title insurance
A lender’s policy protects the mortgage lender’s financial interest in the property. Your lender will usually require this policy as a condition of approving and closing your loan.
If a covered title problem threatens the lender’s lien or security interest, the lender’s policy may help protect the lender according to the policy’s terms.
However, a lender’s policy does not protect your equity or ownership interest. Once your loan is paid off, the lender’s policy generally no longer provides a benefit to you.
Owner’s title insurance
An owner’s policy protects your ownership interest in the property, subject to the policy’s coverage, exclusions, exceptions, and limits. It is typically purchased with a one-time premium at closing rather than through recurring monthly payments.
An owner’s policy may help cover certain legal expenses or financial losses if a covered title defect is later discovered. The policy amount is commonly based on the purchase price, although your title professional can explain the available coverage and any endorsements.
An owner’s policy is separate from the lender’s policy. Paying for the lender’s coverage does not automatically insure you.
Is owner’s title insurance required in Tennessee?
In many financed transactions, the lender requires a lender’s title insurance policy. An owner’s policy is generally optional, but Tennessee law requires buyers to receive notice that owner’s title insurance may be available.
Under Tennessee Code § 56-35-133, the person handling the settlement must generally obtain a written statement from the purchaser at or before closing confirming that the buyer:
- Received notice that owner’s title insurance may be available; and
- Chooses either to purchase or decline that coverage.
The notice may be combined with other closing documents, but the owner’s title insurance acknowledgment must be separately signed. Certain transactions, including some foreclosures, court-ordered sales, tax sales, and transfers where recording tax is not payable, may be treated differently.
If you are purchasing a home with a mortgage and only a lender’s policy is being issued, Tennessee insurance rules also require written notice explaining that the lender’s policy does not protect you and that you have the right to obtain an owner’s policy.
Before declining coverage, ask the closing agent to explain what the policy would cover, what it excludes, and how much it would cost.
How much does title insurance cost?
The total amount shown on your closing disclosure may include several title-related charges, such as:
- Owner’s title insurance premium
- Lender’s title insurance premium
- Title search and examination fees
- Settlement or closing fees
- Recording charges
- Document preparation fees
- Endorsements or special coverage
- Survey-related services, when applicable
Tennessee title insurance companies file their rates with the state, and the title insurance regulatory framework is administered by the Tennessee Department of Commerce & Insurance. You can review consumer and regulatory resources through the Tennessee Insurance Division.
Your title company or settlement agent should provide an itemized estimate. Ask whether a simultaneous-issue rate or other pricing arrangement applies when owner’s and lender’s policies are purchased together. Do not assume that every title company charges the same total amount for every service.
What should I review in the title commitment?
Before closing, you may receive a title commitment or similar preliminary document describing the proposed coverage and any matters that will be excluded from the final policy.
Review it carefully and ask questions about:
- The current owners of record
- The legal description
- Outstanding mortgages or liens
- Property tax status
- Easements
- Restrictions and covenants
- Rights of way
- Utility or access agreements
- Mineral rights, if relevant
- Survey exceptions
- Unresolved judgments
- Probate or estate issues
- Requirements that must be completed before the policy can be issued
Some exceptions are routine, while others may affect how you use, improve, access, or finance the property. For example, an easement could allow another party to use part of the property, while a restrictive covenant could limit certain improvements.
Do not wait until the day of closing to review these items. If you have concerns, raise them promptly with your real estate agent, title professional, lender, or attorney.
What does title insurance not cover?
Title insurance is important, but it is not a guarantee that every property-related problem will be covered.
Policies commonly contain exclusions and exceptions for matters such as:
- Defects you created after purchasing the property
- Issues specifically listed as exceptions
- Certain zoning or land-use matters
- Environmental conditions
- Physical defects in the home
- Boundary issues that are not covered by the policy
- Problems you knew about but failed to disclose
- Certain liens or claims arising after the policy date
Coverage can vary significantly by policy form and endorsements. Read the policy, not just the estimate. If a specific concern matters to you, such as access, boundaries, improvements, or mineral rights, ask whether additional research, a survey, or an endorsement may be appropriate.
Title insurance also does not replace a home inspection. A title search examines ownership and legal interests; a home inspection evaluates the physical condition of the property. You can learn more about the physical review process in our Tennessee home inspection checklist.
Can cash buyers benefit from an owner’s policy?
Cash buyers do not have a lender requiring a mortgagee’s policy, but they may still want to consider an owner’s policy.
A cash purchase gives you full ownership exposure from the moment the deed is recorded. Without lender coverage, there may be no policy protecting a financial interest in the transaction. An owner’s policy may provide valuable protection if a covered title issue later affects your ownership or results in a claim.
Cash buyers should ask:
- Will a full title search be completed?
- What exceptions will appear in the policy?
- Is an owner’s policy available?
- What is the total cost?
- Are endorsements recommended for this property?
- Who will handle any title-related issue discovered before closing?
The right decision depends on the property, the transaction, your financial circumstances, and your tolerance for risk. A Tennessee real estate attorney or qualified title professional can explain the policy language for your situation.
What should I ask before closing?
Use these questions to make the title insurance portion of your closing clearer:
- Is the quoted premium for an owner’s policy, a lender’s policy, or both?
- What coverage does the owner’s policy provide?
- What exclusions and exceptions will apply?
- Has the title search identified any liens, judgments, easements, or ownership concerns?
- Is a survey recommended?
- Are there endorsements available for access, boundaries, improvements, or other concerns?
- Will the closing statement itemize title-related charges and compensation?
- What written election or waiver will I be asked to sign?
- Who should I contact if a title problem is discovered after closing?
The Tennessee Department of Commerce & Insurance title agency licensing procedures also explain that title insurance agencies operating in Tennessee must hold a certificate of authority.
How Haus can help you prepare for closing
Title insurance is only one part of a successful Tennessee real estate transaction, but understanding it can help you make informed decisions before you sign.
Your Haus – CVILLE Tennessee real estate professional can help you coordinate questions among the lender, title company, seller, and other members of your closing team. If you are buying in Clarksville, relocating to the area, or comparing properties across Tennessee, our experienced team is committed to guiding you through each step.
Please contact Haus when you are ready to discuss your next move.
This article provides general educational information and is not legal, insurance, or financial advice. Tennessee laws, regulations, policy forms, rates, and closing requirements may change. For advice about your specific transaction or title policy, consult a Tennessee real estate attorney, licensed title professional, lender, or the Tennessee Department of Commerce & Insurance.
