Most insurance protects you from something that might happen later. Title insurance protects against problems that already exist in a property's history but have not surfaced yet, such as an unknown lien, a forged signature in a prior deed, or a recording error. You generally pay for it once, at closing. Here is how it works in Colorado and what to look for.
Owner's policy vs lender's policy
- Lender's policy: protects the lender's interest in the property up to the loan amount. Lenders generally require one when you finance a purchase.
- Owner's policy: protects your ownership interest, usually up to the purchase price, for as long as you or your heirs own the property. It is what protects your equity.
The two are usually issued together at closing, which title companies often price at a combined or discounted rate.
Who customarily pays in Colorado
In Colorado it is customary for the seller to pay for the owner's title insurance policy, and the buyer typically pays for the lender's policy. That is a custom, not a law. The Colorado Real Estate Commission's standard contract lets the parties choose who selects the title company and who pays for the owner's policy, and the choice of title company generally goes with the obligation to order the commitment and deliver it by the contract's record title deadline. Everything is negotiable, so read that section of your contract with your agent.
The standard contract also addresses owner's extended coverage, which can remove some standard exceptions from the owner's policy, such as certain unrecorded matters. Who pays for it is also negotiated. Ask the title company what extended coverage would add for your property and what it requires.
Reading the title commitment
Before closing, the title company issues a title commitment, its promise to issue policies once certain conditions are met. It is usually organized like this:
- Schedule A: the basics, including the proposed insured parties, policy amounts, who currently holds title, and the property's legal description. Confirm names and the legal description are correct.
- Schedule B, Part I (Requirements): what must happen before policies are issued, such as paying off the seller's mortgage, recording the new deed, and releasing liens.
- Schedule B, Part II (Exceptions): matters the policy will not cover. This is the section to read most carefully, because anything listed here is excluded from your protection.
Your contract sets a title objection deadline for raising concerns about what the commitment shows. Ask the title company for copies of any recorded document listed as an exception.
Common Colorado title issues
Easements
Utility, drainage, and access easements are common and often harmless, but they can limit where you build a fence, shed, or addition. Look for any easement that crosses the area where you plan to build.
Covenants, HOAs, and metro districts
Declarations, covenants, and HOA documents appear as exceptions and can restrict use, from paint colors to short-term rentals. Documents creating or relating to metropolitan districts and other special districts may also be recorded against the property. Those districts can levy property taxes and fees, so review them alongside the special taxing district disclosure in your contract.
Mineral rights severance
In Colorado, mineral rights are often owned separately from the surface, sometimes because they were reserved decades ago. A commitment may list prior mineral reservations or conveyances as exceptions, and a standard owner's policy generally does not insure mineral ownership. If minerals or surface use matter to you, especially on rural acreage, ask the title company what the records show and whether any endorsements are available.
Liens and judgments
Unpaid mortgages, tax liens, contractor (mechanic's) liens, HOA liens, and judgments against the seller normally appear as requirements to be paid or released at closing. Watch for anything that stays on the exception list instead.
Wire fraud red flags
Real estate closings are a major target for wire fraud. The FBI's Internet Crime Complaint Center has reported a rise in business email compromise schemes tied to real estate, and the CFPB warns buyers to confirm wiring instructions directly. Treat these as red flags:
- An email or text saying wiring instructions have changed at the last minute.
- Pressure to wire quickly or keep the request confidential.
- Sender addresses or phone numbers that are slightly different from ones you have used before.
Before sending money, call the title company at a phone number you got independently, such as from your contract or the company's official website, never from the email with the instructions. Caller ID can be faked. If you think you have been targeted, contact your bank immediately and report it to the FBI at ic3.gov.
Closing day
In Colorado, the title company commonly acts as the closing agent. It collects funds, disburses payoffs, and records the deed and deed of trust with the county clerk and recorder, which is El Paso County for most Colorado Springs homes. Bring a government-issued ID and confirm in advance how your funds must arrive. After closing, the final title policies are issued, and you should keep your owner's policy with your important documents.
Where title charges show up on your disclosures
On the Loan Estimate, title service fees appear on page 2 in Section B (services you cannot shop for) or Section C (services you can shop for), and their names begin with the word "Title." The CFPB notes that an owner's title policy you choose to buy is listed in Section H, "Other," and marked optional. The Closing Disclosure, which you receive at least three business days before closing, uses the same sections and shows who pays each item, so a seller-paid owner's policy should appear in the seller's column. Because federal disclosure rules split the premium between the two policies in a set way, individual lines may differ from a title company's rate sheet; compare totals and ask about anything that changed. For the rest of the fees, see understanding closing costs.
How this affects your loan
Your lender cannot close until the title company can issue a clean lender's policy, so title requirements are on our checklist too. An unreleased lien, a name mismatch, or a missing signature can delay closing, which can bump against your rate lock. If you shop for title services listed in Section C, tell us early so the Closing Disclosure reflects your choice. And when the Closing Disclosure arrives, compare it with your Loan Estimate; we will explain any line that changed.
Sources: Colorado Division of Real Estate on title insurance, Holland & Hart on CREC contracts and ordering title, CFPB on title service fees, CFPB Loan Estimate explainer, CFPB Closing Disclosure explainer, FBI report on real estate wire fraud, FBI IC3, ALTA policy forms.