Title Insurance in Texas: The Real Estate Exam Guide

Title insurance is one of the most Texas-specific topics in the Ownership, Transfer, and Title area, because Texas regulates it more tightly than almost any other state. Learn the two policies and the promulgated-rate rule, and these questions become quick points.

What is title insurance, and why does the exam care?

Title insurance protects an owner or lender against financial loss from covered title defects and risks under the policy, usually matters that existed by the policy date. Unlike hazard insurance, which mainly covers future physical events such as fire, title insurance generally looks backward at the ownership record.

Most insurance protects you against something that might happen later. Title insurance is the opposite. It protects you against something that already happened but nobody found: a forged signature in an old deed, an error in a past conveyance, a missing heir with a claim, or an unpaid lien that never got released.

The Texas Department of Insurance describes an owner's policy as protection against ownership problems that arose before you bought the property but were not known at the time. It lasts as long as you or your heirs own the land. If a covered claim surfaces, the title company defends you and pays covered losses.

This connects directly to two other exam topics. A clean transfer depends on a valid deed, and priority depends on recording. Title insurance is the safety net for the defects those systems miss.

Owner's policy vs loan policy: who does each protect?

An owner's policy protects the buyer's covered ownership interest, while a loan policy protects the lender's covered lien interest. Texas uses T-1 and residential T-1R owner forms, plus T-2 and short-form residential T-2R loan forms. The two policy families protect different insured interests.

This is the distinction the exam tests most. Keep the two policies in separate boxes.

Two traps live in that table. First, a buyer who obtains only a loan policy has protected the lender, not the buyer's equity. Second, Rate Rule R-5 sets a $100 premium for each qualifying loan policy when the owner's and loan policies are issued simultaneously and meet the rule's same-date, same-land, policy-amount, and exception conditions. Do not quote the $100 figure without those conditions.

Why is the Texas title-insurance premium standardized?

Because Texas is a promulgated-rate state. Texas Insurance Code Section 2703.151 requires the state to fix and promulgate the premium rates that all title insurance companies and agents must charge. Every licensed title company charges the identical premium for the same coverage amount, so you cannot shop for a cheaper title premium in Texas.

This is the single most Texas-specific fact on the topic, and national study guides often get it wrong. The Texas Department of Insurance sets the basic premium schedule and the rate rules. Commissioner Order 2025-9697 reduced the statewide basic premium rates by 6.2 percent effective March 1, 2026.

What does that mean for a buyer or agent? Two companies applying the same policy amount and the same rate rule should calculate the same title premium. Eligible credits, simultaneous-issue treatment, endorsements, recording charges, and other permitted charges can still change the total. Compare the same coverage and rate assumptions, then compare service and closing experience.

For a concrete current example, TDI's March 1, 2026 schedule lists a $1,612 basic premium for a $268,500 policy. That is a basic-rate example, not a universal closing-cost quote; endorsements, credits, simultaneous issue, escrow charges, recording fees, and other permitted items can change the final total.

Texas also sets the policy forms and the commitment

The Texas Department of Insurance promulgates the forms as well as the rates. T-1 is the general owner's policy, T-1R is the residential owner's form for one-to-four family residences, T-2 is the loan policy, T-2R is a short-form residential loan policy, and T-7 is the commitment. Agents do not draft title policy language.

The Basic Manual of Title Insurance published by the Texas Department of Insurance adopts all the title insurance forms used in the state and sets the rules for using them. Because both the rates and the forms are standardized, a T-1 owner's policy reads the same whether it is issued in Houston or in El Paso.

The commitment matters to agents. Before closing, the title company issues a Commitment for Title Insurance, form T-7. Schedule A identifies the proposed policy, insured, estate, vesting, and land. Schedule B lists exceptions. Schedule C states requirements that must be satisfied before the policy issues, such as paying a lien or curing a defect. Schedule D states the estimated premium and endorsements and supplies required disclosures about the issuing company and agent. A buyer or agent reviews the commitment during the title review period, which is why reading it carefully is part of protecting the client. The promulgated contract forms that trigger this process are covered in the TREC promulgated forms guide.

What a title policy covers, and what it excludes

A Texas title policy lists what it insures in Schedule A and what it does not cover in Schedule B. Schedule A shows the insured party, the policy amount, and the property. Schedule B lists the exceptions, such as recorded restrictions, easements, taxes not yet due, and matters a survey would reveal.

Every Texas policy has the same two-part structure, and the exam can ask what belongs in each.

• Schedule A is what is insured: the name of the insured, the dollar amount of coverage, the estate or interest, and the legal description of the property.
• Schedule B is what is excepted: items the policy will not cover, such as recorded restrictive covenants, existing easements, property taxes and standby fees not yet due, liens the buyer agrees to accept, and defects a current survey would show.

Common covered risks can include forgery in the chain, an undisclosed heir, or an error in a prior instrument, depending on the policy. Matters excluded by the form or listed as exceptions in Schedule B are not covered. Texas Insurance Code Section 2502.002 adds a distinctive limit: a title insurer may not insure against unmarketability of title itself. Read the actual policy, exclusions, exceptions, and endorsements rather than assuming every title problem is insured.

Who pays for the owner's policy in Texas?

It is negotiable and set in the contract. In the TREC One to Four Family Residential Contract, Paragraph 6A names the title company and states whether the buyer or the seller pays for the Owner's Policy. In many Texas markets the seller customarily pays, but this varies by region and must be specified in the contract.

There is no statewide rule forcing one party to pay. What controls is the contract. Paragraph 6A of the standard TREC resale contract names the title company that will issue the owner's policy and identifies who pays for it. Market custom fills the blank in many deals. Sellers often pay in some regions and buyers pay in others, but the parties can still negotiate it either way.

For agents, the takeaway is simple: never assume, always confirm what Paragraph 6A says. The line-by-line walkthrough is in the one to four family contract guide.

Title search vs title insurance: two different jobs

A title search examines public records to build the chain and identify problems. A title policy supplies financial protection for covered risks under its terms. The policy is not limited to whatever the examiner happened to miss, and it does not cover every off-record problem.

Before issuing a policy, the title company searches the county records, traces the chain, and lists requirements and exceptions in the commitment. Some defects, such as a forged signature or an undisclosed heir, may not appear in the record. Whether a resulting loss is covered depends on the policy language. Recorded liens, such as a mechanic's lien, should be identified and handled before closing rather than assumed to be insured.

Original practice questions

Use these to check yourself. They are written for practice and are not copied from any real exam.

Question 1. A Texas buyer gets a mortgage and, at closing, buys only a loan policy of title insurance. A year later a hidden defect in the title causes the buyer to lose equity. Who is protected by that loan policy?

• A) The buyer, up to the sales price
• B) The lender, for the loan amount
• C) Both the buyer and the lender
• D) The seller

Answer: B. A loan policy protects the lender for the loan amount. It does not protect the buyer's equity. To protect their own interest, the buyer needed an owner's policy. (Original question.)

Question 2. A buyer calls three Texas title companies to compare the premium for the same owner's policy coverage amount. What will the buyer find?

• A) The premiums vary widely, so shopping saves money
• B) The premiums are identical, because the state sets the rate
• C) The cheapest company wins the business on price
• D) Premiums are negotiable with each company

Answer: B. Texas Insurance Code Section 2703.151 requires the commissioner to set title premium rates. Companies using the same coverage amount and rate rule apply the same basic premium schedule. The current schedule took effect March 1, 2026. (Original question.)

Question 3. Which title insurance document does a title company issue before closing to tell the buyer what the final policy will cover and what it requires?

• A) The Schedule B exceptions page
• B) The T-2 Loan Policy
• C) The Commitment for Title Insurance
• D) The warranty deed

Answer: C. The Commitment for Title Insurance (form T-7) is issued before closing. It previews the coverage, the requirements, and the exceptions, and the buyer reviews it during the title review period. (Original question.)

Question 4. Where on a Texas title policy would you find the recorded easements and property taxes not yet due that the policy will not cover?

• A) Schedule A
• B) Schedule B
• C) The T-1 form number
• D) The deed of trust

Answer: B. Schedule B lists the exceptions and items the policy does not cover. Schedule A lists what is insured: the insured party, the amount, and the property. (Original question.)

Common exam traps to remember

The title insurance questions punish four confusions: swapping the owner's and loan policies, thinking you can shop for a cheaper Texas premium, treating title insurance like future-event coverage, and forgetting it is a one-time premium.

• Owner's policy protects the owner; loan policy protects the lender. Do not swap them.
• Texas sets the rate schedule and rules. Compare the same policy amount, credits, endorsements, and permitted charges before comparing totals.
• Title insurance looks backward. It covers defects that existed before the policy date, not future events.
• It is a one-time premium. Paid once at closing, not annually.
• The forms are standardized too. T-1, T-1R, T-2, T-2R, and T-7 are state-adopted, not company drafted.

You can drill these against timed Texas questions in the free practice test, and look up any unfamiliar term in the Texas real estate glossary.

Frequently Asked Questions

For quick answers to every common Texas exam question, see the Texas real estate exam FAQ.

What is the difference between an owner's policy and a loan policy in Texas?

An owner's policy protects the buyer's covered ownership interest, while a loan policy protects the lender's covered lien interest. Texas uses T-1 as the general owner form and T-1R for an improved one-to-four family residence. T-2 is the loan policy and T-2R is the short-form residential loan policy. A loan policy does not protect the buyer's equity.

Do Texas title companies charge the same policy premium?

Because Texas is a promulgated-rate state. Texas Insurance Code Section 2703.151 requires the commissioner to set the premium rates. Companies using the same policy amount and rate rule apply the same basic premium schedule. Credits, endorsements, simultaneous-issue treatment, and permitted nonpremium charges can still affect the total.

Is title insurance a one-time cost or an annual premium?

It is a one-time premium paid at closing. The owner's policy then protects you for as long as you or your heirs own the property, with no renewal payments.

Does title insurance cover future problems with my property?

Title insurance generally addresses covered title risks that existed by the policy date, while hazard insurance addresses future physical events. The precise answer depends on the title policy because some coverages may operate after the policy date and exclusions or exceptions can remove coverage. It does not insure future fire, storm, or ordinary property damage.

Who pays for the owner's title policy in a Texas home sale?

It is negotiable and stated in Paragraph 6A of the TREC contract. In many Texas markets the seller customarily pays, but it varies by region and the contract controls, so it must be filled in and agreed by the parties.

What is the difference between Schedule A and Schedule B?

Schedule A shows what is insured: the insured party, the coverage amount, and the property. Schedule B lists the exceptions and exclusions, meaning the recorded restrictions, easements, taxes not yet due, and survey matters the policy will not cover.

Sources and Methodology

This article was reviewed against the Texas Insurance Code and Texas Department of Insurance materials on August 12, 2026. Insurance Code Section 2703.151 directs the commissioner to set title premium rates. Commissioner Order 2025-9697 reduced basic rates by 6.2 percent effective March 1, 2026. Basic Manual Rate Rule R-5 sets the $100 loan-policy premium when an owner's and loan policy are issued simultaneously and its listed conditions are met. Form T-7 and Procedural Rule P-21 support the four-schedule commitment explanation. Insurance Code Section 2502.002 prohibits coverage against unmarketability of title itself. Paragraph 6A of current TREC Form 20-19 identifies who pays for the owner's policy. Rules, forms, and rates can change, so verify current official sources.

Official Source Links

• Texas Department of Insurance: Owner's Policy
• Texas Department of Insurance: Loan Policy
• Texas Department of Insurance: Title Insurance FAQ
• Texas Department of Insurance: Basic Manual of Title Insurance
• Texas title insurance basic premium rates effective March 1, 2026
• Texas Insurance Code Chapter 2703 (Rates and Forms)
• Texas Insurance Code Section 2502.002 (Unmarketability coverage prohibited)
• TREC: One to Four Family Residential Contract (Resale)

This post is educational content for Texas real estate sales agent candidates. It is not legal, insurance, or title advice. Title insurance is issued by licensed title companies under rules set by the Texas Department of Insurance, and those rules can change, so confirm the current Texas Insurance Code, the Basic Manual of Title Insurance, and the current TREC contract, and consult a professional before you rely on any point in a real transaction.