Title insurance is a crucial component of real estate transactions, providing protection to both property owners and lenders against potential issues with the title of the property.

Owner’s title insurance and lender’s title insurance are different products and it’s important for buyers to understand that while they both serve to safeguard parties involved in a real estate transaction, they have distinct purposes and offer different types of coverage.

If you are a buyer looking at your good faith estimate from the lender you need to be aware that it is most likely the coverage for the bank.  Often lenders won’t directly offer you the coverage that protects YOU as the buyer.  You should ask for an Owner’s Policy.

Owner’s Title Policy

Owner’s title insurance or owner’s policy, is purchased by the buyer or owner of the property. It is designed to protect the owner’s investment in the property and provide coverage against any title defects or claims that may arise in the future. Here are some key features of an owner’s title policy:

• Coverage for Ownership Issues:  Owner’s title insurance protects against various issues that may affect the ownership of the property, such as undisclosed heirs, forged documents, errors in public records, or mistakes in the title examination process.

• Protection Against Liens: The policy also provides protection against any outstanding liens or encumbrances on the property that were not discovered during the title search, ensuring that the owner’s title is free and clear of any burdensome claims.

• Coverage Lasts for the Duration of Ownership:  Once purchased, an owner’s title policy typically remains in effect for as long as the owner or their heirs have an interest in the property. This means that even if the owner sells the property, the policy continues to provide coverage for any claims arising from events that occurred during their ownership.

• One-Time Premium:Owner’s title insurance requires a one-time premium payment at the time of purchase, based on the purchase price of the property. This payment provides coverage for as long as the owner holds an interest in the property, offering peace of mind without the need for ongoing payments.

Much like any other insurance policy they’ll have rather large exclusions for the coverage so be sure you are familiar with your policy that you are purchasing.

Lender’s Title Policy:

Lender’s title insurance, also known as a loan policy, is a separate policy that is typically required by mortgage lenders as a condition of providing financing for the purchase of a property. While it may seem similar to an owner’s title policy, lender’s title insurance only covers the lender’s interest in the transaction.   Lender’s title insurance protects the mortgage lender against any title issues that may affect their security interest in the property. It ensures that the lender’s lien on the property is valid and enforceable, safeguarding their financial interest in the transaction.  While the lender requires the borrower to purchase lender’s title insurance, the borrower is typically responsible for paying the premium. This cost is often included as part of the closing costs associated with the mortgage loan.