Owner’s Policy Vs Lender’s Policy

Owner’s Policy Vs Lender’s Policy

There are two types of Title Insurance policies—the Owner’s Policy and the Loan Policy (sometimes referred to as the “Lender’s Policy”). While most Lenders only require a Loan Policy, buyers should always consider purchasing an Owner’s Title Insurance Policy to protect their entire investment.

But Why?

With only a slight cost difference, but a significant difference in protection, we usually recommend the Owner’s Policy.

Here’s the breakdown…

Owner’s Policy

  • Covers the full purchase price
  • Protects the owner for the full purchase price until the property is transferred. If owner dies, his/her heirs are automatically protected.
  • Covers the owner for any issues or defects in the title that may occur.
  • Protects the owner against title issues, i.e. fraud, forgery, prior liens, lack of access, erroneous legal description, improperly recorded deed, building encroachment on property, old right-of-way, another person claiming stake in the property. All issues could negatively affect owner’s enjoyment of property, as well as his/her ability to refinance, etc.
  • Additional cost for Owner’s policy is a bargain considering the owner’s level of protection.

Loan Policy

  • Only covers the amount of the mortgage
  • Only protects the lender until the mortgage is satisfied. Does not cover the owner for the full purchase price.
  • The lender is not responsible for the owner’s defense and remedy of title defects.
  • The title company pays claim to lender only, while owner’s interest may be left uncovered by policy. Owner is left with no title company backing him/her up or paying for costly research or legal defense.
  • Very little cost differential from Owner’s policy, especially since owner is not covered.

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