Title Insurance in Virginia: What It Covers, What It Doesn't, and Why It Matters

The information in this article is for general informational purposes only and does not constitute legal advice. Laws change and individual circumstances vary. Consult a licensed Virginia attorney about your specific situation. Reading this article does not create an attorney-client relationship nor does merely contacting our office through this website or any other means.

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When you purchase real property in Virginia, one of the closing costs you will encounter is a premium for title insurance. For many buyers — particularly first-time buyers — this line item on the settlement statement raises questions: what exactly is being insured, why does it cost what it costs, and is it actually necessary?

The short answer to that last question is: for most buyers, yes. Title insurance addresses a category of risk that no amount of inspection or due diligence can fully eliminate — defects in the chain of title that existed before you purchased the property and that may not surface until years later.

This article explains how title insurance works in Virginia, what the two types of policies cover, what they do not cover, and what the Virginia State Corporation Commission recommends buyers understand before closing.

What Title Insurance Is and Why It Exists

Every piece of real property has a history. That history is recorded in deeds, court judgments, tax records, and other documents in the public land records. When you purchase property, your title company or closing attorney conducts a title search — a review of that recorded history — to identify any claims, liens, or defects that may affect your ownership.

The problem is that public records are not always complete or accurate. Some defects cannot be found in a title search even with a thorough examination:

• Forged deeds in the chain of title that purport to transfer ownership but were never validly executed
• Fraud by prior owners or parties in prior transactions
• Undisclosed heirs who may have an interest in the property through inheritance
• Clerical or indexing errors in public records that cause prior instruments to be overlooked
• Judgments and liens that were improperly indexed or recorded in the wrong jurisdiction
• Unpaid property taxes from prior ownership periods that were not discovered in the search
• Prior mortgages that were paid but not formally released of record
• Easements or restrictions recorded in an unexpected place in the chain
• Competency issues in prior deeds — a grantor who lacked legal capacity at the time of execution
• Improper probate of a deceased prior owner’s estate

Any of these problems could generate a claim against your title after you have closed and paid for the property. Title insurance provides a policy that covers the cost of defending against such claims and, if necessary, paying a judgment up to the policy limit.

Title insurance in Virginia is regulated under Virginia Code § 38.2-4600 et seq. and oversight is provided by the Virginia Bureau of Insurance, a division of the State Corporation Commission (SCC).

Two Types of Policies

Owner’s Policy

An owner’s title insurance policy protects you, the buyer, for as long as you or your heirs own the property. The protection is permanent — it does not expire at the end of a term and does not need to be renewed. If a covered claim arises 20 years after you purchased the property, your policy still applies.

The coverage amount is typically the purchase price of the property. If a claim arises and is covered, the insurer will:

• Defend you against the claim at no additional cost to you
• Pay any covered loss, up to the face amount of the policy
• Negotiate and settle claims on your behalf where appropriate

Owner’s policies are typically offered in a standard form (ALTA Standard Policy) and an enhanced form (ALTA Enhanced or Homeowner’s Policy). Enhanced policies often include additional coverage for risks such as post-policy forgery, encroachments, and certain zoning violations. Ask your title company which form is being offered and what the differences are.

An owner’s policy cannot be transferred to a subsequent buyer. If you sell the property, the new buyer needs their own policy.

Lender’s Policy

A lender’s title insurance policy (also called a loan policy) protects your mortgage lender’s security interest in the property — not your ownership interest. If you are obtaining a mortgage to purchase or refinance, your lender will almost certainly require a lender’s policy as a condition of the loan.

Key differences from an owner’s policy:

• Coverage decreases as your loan balance decreases, and the policy terminates when the mortgage is paid off
• If you refinance, the prior lender’s policy ends and a new one must be issued for the new lender
• The lender’s policy protects only the lender — if a title defect causes you to lose the property, the lender’s policy compensates the lender’s loss, not yours

This is one of the most important reasons to obtain an owner’s policy separately. A buyer who skips the owner’s policy and relies on the lender’s policy has no protection for the equity in the property above the loan balance.

What Title Insurance Does Not Cover

Understanding the limits of title insurance is as important as understanding what it covers. Title insurance specifically addresses pre-existing, hidden title defects — problems that existed before you took ownership and that were not discoverable through a reasonable title search.

Title insurance generally does not cover:

• Post-purchase liens and encumbrances — debts you incur after closing (your own mortgages, judgment liens against you, mechanics’ liens for work you contracted)
• Zoning and land use violations that are a matter of public record (standard policies; some enhanced policies provide limited coverage)
• Physical conditions of the property — environmental contamination, building code violations, structural defects, and similar matters are addressed by inspection, not title insurance
• Boundary line disputes unless a survey is obtained and the policy is specifically endorsed to cover survey matters — a title policy insures the record title, not the physical dimensions of what you are standing on
• Easements and restrictions that are visible on inspection or clearly shown in the public record and disclosed in the title commitment
• Matters created, suffered, assumed, or agreed to by the insured — if you create a lien or encumbrance yourself, you cannot claim a title loss from it

Reading the title commitment (the preliminary document the title company issues before closing that describes what will and will not be covered) carefully before closing is essential. The commitment identifies specific exceptions to coverage — matters that the policy will not insure against. These often include existing easements, restrictive covenants, and any matters shown on a current survey.

The Title Search and Commitment Process

Before issuing a policy, the title company or closing attorney conducts a title search — a review of the chain of title in the land records of the locality where the property is located. In Virginia, land records are maintained by the circuit court clerk of each county and independent city.

The search typically covers at least the past 40 to 60 years of recorded instruments, though a complete search traces the title back to an original grant or other root of title.

Based on the search results, the title company issues a title commitment (sometimes called a binder), which states:

• The conditions under which it will issue a policy
• The amount of coverage
• Requirements that must be met before the policy is issued (such as payoff of existing liens)
• Exceptions to coverage — specific items in the public record that the policy will not insure against

Buyers should review the title commitment before closing, not after. The exceptions to coverage identify known risks and encumbrances that the buyer is accepting. An attorney can help you evaluate what the exceptions mean and whether any require further investigation or negotiation.

The One-Time Premium

Title insurance is paid with a one-time premium at closing. Unlike homeowners insurance or mortgage insurance, there is no annual renewal. The premium provides coverage for the entire period you own the property (for an owner’s policy).

The premium is typically calculated as a rate per thousand dollars of coverage. Unlike many other lines of insurance, Virginia title insurers are not subject to standard rate-filing requirements with the State Corporation Commission — title insurance companies set their own rates. Because rates vary among providers and title companies may also charge different settlement service fees on top of the premium, the Virginia SCC recommends that buyers comparison-shop and include all fees — not just the base premium — in their comparison. Title insurers remain subject to anti-discrimination rules and must be licensed by the Bureau of Insurance, but rate levels themselves are not regulated in the way that, for example, auto or homeowners insurance rates are.

Reissue credits: If the property was previously insured and the prior owner’s policy was issued within a certain number of years, or if you are refinancing rather than purchasing, you may be entitled to a reissue rate — a reduced premium that recognizes the relatively shorter time period since the last title examination. Ask your title company or closing attorney whether a reissue credit applies.

Who pays? The payment of title insurance premiums is negotiable between buyer and seller. Local custom varies across Virginia — in some markets, the seller traditionally pays for the owner’s policy; in others, the buyer pays. The contract of sale should specify who bears this cost.

Selecting a Title Company in Virginia

In Virginia, title insurance must be issued by a licensed title insurance company through a licensed title insurance agent. The Virginia Bureau of Insurance maintains records of licensed companies and agents, and consumers can verify licensure by contacting the Bureau at 1-877-310-6560 or through the SCC’s online resources.

Your real estate agent, lender, or attorney may recommend a title company, but you are not required to use the recommended company. Shopping for title services and comparing total fees (premium plus settlement service fees) can produce meaningful savings, particularly on higher-value transactions.

For a thorough overview of the title insurance process directly from Virginia’s insurance regulator, see the Virginia Title Insurance Guide published by the Virginia State Corporation Commission Bureau of Insurance.

When Title Issues Arise After Closing

If a title problem surfaces after you have closed on a property, contact your title insurance company promptly. Most policies require timely notice of a claim. The insurer will investigate the claim, and if it is covered, will either defend you against the assertion, clear the defect, or compensate you for your covered loss.

An attorney can assist you in evaluating a potential title claim, communicating with your insurer, and pursuing any available remedies if a title issue has affected your ability to sell or use the property.

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This article is general information only and is not legal advice. Do not rely on this article to make decisions about your specific situation. Contact Valley Legal or another licensed Virginia attorney to discuss your case. Attorney advertising.

Valley Legal, PLLC is located at 107 Pepper St SE, Christiansburg, Virginia 24073, and serves clients throughout the New River Valley of Virginia, including Montgomery County, Blacksburg, Radford, Pulaski, and surrounding communities.