Why a new home has title risk at all
Title insurance protects against defects in the legal ownership of a property — forgery, fraud, errors in public records, undisclosed heirs, unrecorded liens and boundary mistakes. A new home sits on land with a history even if the house has none: the lot may have been subdivided, inherited, foreclosed or encumbered before the builder bought it, and a title search can miss a defect that only surfaces when someone claims the land. That is the ordinary case for title insurance, and it applies to new builds as much as to old ones.
The new-build-specific risk is sharper. A mechanic's lien is a legal claim filed against a property by a contractor, subcontractor or material supplier who was not paid for work on it. If the builder defaults or simply fails to pay a subcontractor, that subcontractor can file a lien against your home — and you can become responsible for settling the debt even though you paid the builder in full. The lien attaches to the property, not to the builder's bank account, which is why the owner's problem survives the builder's disappearance.
Boundary and survey errors are the second new-build risk. A new subdivision means new lot lines, new legal descriptions and new surveys, and an error in any of them can produce a boundary dispute with a neighbour or a claim that part of your home sits on land you do not own. Title insurance covers boundary disputes arising from errors in public records; a survey endorsement extends that protection to matters a survey would show.
The lender's policy and the owner's policy
If a mortgage funds the new build, the lender will invariably require a lender's title policy as a condition of the loan, and will usually require it to remain in force through the conversion of a construction loan to a permanent mortgage. The lender's policy protects the lender's security interest up to the loan amount. It does not protect your equity, your down payment or your right to occupy the home — for that, you need a separate owner's policy, bought at the same time, which protects your investment up to the purchase price for as long as you or your heirs own the home.
The builder may also have title insurance, but the builder's policy protects the builder and often the lender, not the buyer, and its coverage typically ends when the construction loan converts to a permanent mortgage. Do not assume the builder's policy covers you: ask the title company, in writing, whose interests each policy protects and when each one ends.
An owner's policy can usually be bought after closing, as the site's guide to buying title insurance after closing explains — but buying after closing leaves the gap between closing and the policy date uncovered, and a lien filed in that gap is your problem. Buying at closing is the cheaper and safer order, and a simultaneous issue — lender's and owner's policies together — usually costs less than buying the owner's policy later as a standalone search.
What the standard policy covers — and what it does not
A standard owner's policy covers hidden title defects that existed before the purchase date: forgery, fraud, clerical errors in public records, claims from undisclosed heirs, and liens recorded before the policy's effective date. The insurer will pay the legal costs of defending the title against a covered claim and pay for the resulting financial loss up to the policy limit.
What it does not cover is the important part for a new build. A standard policy covers only mechanic's liens recorded before the policy's effective date; it does not automatically protect you from liens that arise after construction begins. If construction is still under way, or was recently finished, when the policy is issued, a subcontractor's lien may not yet be recorded — and the standard policy will not cover it. The fix is an endorsement or an enhanced policy: the ALTA Homeowner's Policy provides enhanced coverage including some risks that arise after the deed is recorded, and specific endorsements — including the ALTA 32-series construction-loan endorsements (ALTA 32, 32.1 and 32.2, with ALTA 33 disbursement endorsements) on the lender's policy only — extend protection to post-policy liens. Ask the title agent which endorsements your policy carries, and get the answer in writing.
Title insurance is also not a home warranty and not hazard insurance. Construction defects, building-code violations, zoning non-compliance and environmental risks are generally excluded from standard cover, and unpermitted work is usually excluded unless it has produced a recorded lien or a government order affecting ownership. A home that was badly built is a builder-warranty and construction-defect question, not a title question — and the two should not be confused, because neither policy pays the other's claims. The guide to homeowners insurance requirements covers the hazard side of the same purchase.
What to check before you close
Before closing, ask the title company for the commitment — the document that lists what the policy will cover and what it excepts — and read the exceptions. A mechanic's-lien exception on a new build is the one to notice: it means liens are not covered unless the exception is deleted, which usually requires lien waivers from the builder and the subcontractors, or an endorsement. Ask whether the policy includes gap coverage, which extends cover from closing to the recording of the deed.
Ask for lien waivers from the builder and, if possible, from the major subcontractors and suppliers, confirming they have been paid. Ask whether the builder has posted a bond or whether the construction loan's disbursements were conditioned on waivers. And confirm the survey: a new survey, not the builder's marketing plot plan, is what the title company relies on for boundary cover.
Finally, confirm the policy amount. An owner's policy should be issued for the full purchase price, including the land, and should be updated if the price changes before closing. A policy issued for the construction cost alone, or for an earlier contract price, leaves part of your investment unprotected.
Worked example
Consider two ILLUSTRATIVE buyers of new homes, both paying $400,000. The first buys an owner's policy with an enhanced ALTA Homeowner's Policy at closing, with the mechanic's-lien exception deleted after lien waivers from the builder and subcontractors: six months later a roofing supplier files a lien for $18,000 the builder never paid, and the title insurer defends the claim. The second buys no owner's policy, relying on the lender's policy and the builder's assurances: the same lien arrives, the lender's policy protects only the lender's interest, and the buyer pays the supplier or faces a foreclosure of the lien. These are ILLUSTRATIVE contrasts to explain what the owner's policy is for; they predict no real buyer's outcome, and no premium figure is asserted for either buyer.
Illustrative example only — not a fact about any real policy.