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