What title insurance covers, and who pays for it in South Carolina

Two different title insurance policies can turn up on a closing statement, and they protect two different people. A lender's policy, which almost every mortgage requires, protects only the bank's stake in the loan. A separate owner's policy is optional and protects your own ownership of the house, for a one-time fee at closing rather than a recurring premium. South Carolina adds a piece most states skip: a licensed attorney, not a title company working alone, has to run the closing and the title search.

What is title insurance, and why are there two different policies?

Most insurance protects against something that might happen later: a fire, a wreck, a storm. Title insurance works backward. It protects against something that already happened before you bought the home and nobody caught it, a lien a title search missed, a deed someone forged, an heir who never signed off on an earlier sale. The Consumer Financial Protection Bureau's consumer guidance splits this into two products: a lender's policy that protects the bank, and an owner's policy that protects you. They are sold separately, cover different people, and one of them is required while the other is not.

What does a lender's title policy protect, and what does it leave out?

A lender's title policy protects the mortgage company, up to the amount of the loan, and most lenders require one before they will fund a purchase, according to the CFPB's guidance on lender's title insurance. It does not protect your equity in the home. If a claim against the title surfaces after closing, say a contractor from before your purchase who says they were never paid, you are the one who has to answer it first. The lender's policy only makes the bank whole on its share of the loss.

What does an owner's title policy cover that the lender's policy does not?

An owner's policy protects your own financial stake in the property, and it lasts for as long as you or your heirs own the home, for one fee paid at closing rather than a bill that comes back every year, per the American Land Title Association's consumer site, homeclosing101.org. That site lists real claims an owner's policy has paid out on: a lien a title search missed even though the new owners kept making payments, an unpaid lien from a subcontractor the builder never settled with, a home sold by someone using a forged deed, and a utility line running through a backyard that no search turned up before closing.

Who pays for title insurance in South Carolina?

This is a line the buyer and seller negotiate in the purchase contract, not a rule set by statute, and the professional guidance on which side customarily pays the owner's premium in South Carolina does not agree with itself. Lender's title insurance is usually a cost the buyer carries, since it is tied to getting the loan. The honest answer is to raise it early with your closing attorney and get it written into the contract in plain terms, rather than assuming either side is on the hook by default.

Why does a South Carolina closing attorney handle the title work?

South Carolina's courts have held that the core steps of a residential real estate closing, the title search and certification, preparing the deed and other legal documents, the closing itself, and the recording, are the practice of law, and each one has to be performed or directly supervised by a South Carolina-licensed attorney. The South Carolina Bar's Ethics Advisory Opinion 26-01 confirms this, citing the case Boone v. Quicken Loans, and notes that different lawyers can split these steps as long as a licensed attorney stands behind each one. That is different from an escrow-company closing in most other states, and it is one reason a South Carolina closing often runs through a law office rather than a title company alone.

Is the owner's policy worth buying if it's optional?

Nobody writing about this in general terms can answer that for a specific house. It depends on what the title search on that property actually turns up, and that only exists once someone runs it. What the CFPB's guidance does say is practical: you can usually shop for title insurance separately from your mortgage rather than taking whatever your lender offers, and buying the lender's and owner's policies from the same provider is often cheaper than buying them from two different ones. Ask your closing attorney what the search found, and decide from there.

What title insurance doesn't cover

It only reaches backward. A boundary dispute that starts after you move in, a neighbor's fence built on your line next year, a mechanic's lien from work you commission yourself, none of that is what an owner's title policy was built for. It is also not a substitute for a survey or a home inspection, and it is not a reason to skip either one. The policy answers one question: did you actually get clear ownership of what you paid for. It does not answer whether the house itself is sound.