Owner’s vs Lender Policies
Residential properties often have a long
history of previous ownership. There are two types of title insurance policies available to protect the insured property rights against title defects.
They are the owner’s policy and the lender’s policy. This video will highlight
some of the key reasons a buyer should consider purchasing an owner’s and
lender’s policy of title insurance. An owner’s policy is purchased at closing
for a one-time fee and covers you for as long as you own the property.
It protects real estate owners against property loss or damage they might
experience because of liens, encumbrances, or defects in the title to the property.
The policy may also provide defense in courts against lawsuits and claims
raised against your property, and will pay for covered losses. The coverage
provided by each title insurance policy is subject to specific terms,
conditions, exceptions, and exclusions. The mortgage lender will also require
protection against title defects. Loan policies are issued to the mortgage
lender and protect the lender’s security interest in the property until the
borrower, typically the property owner, pays off the mortgage. If you are
borrowing money to purchase your home logically, your lender will want to
protect its investment and generally requires the purchase of lender’s title
insurance. The coverage provided by an owner’s policy differs from that of the
loan policy. While a lender’s policy might protect the owners in some circumstances,
it is designed to protect the lender’s interests and that protection typically
decreases as you pay down your loan, so once the loan is paid off, the lender’s
policy provides no protection to the owner. An owner’s policy provides the
buyer with protection against loss from title defects that arose before the
buyer purchased the property. Only with the purchase of an owner’s policy can an
owner be sure they have coverage for as long as they own the property. Depending
on state law and/or local practice, the buyer may pay an additional premium for the owner’s policy or pay a simultaneous amount in a separate lender policy. Title
insurance protects your property’s interest. It provides peace of mind. A
home purchase is one of the biggest investments a person will make during
their lifetime. Shouldn’t that investment be protected?