One of the most common questions we get at Wooden Title & Escrow is: What is the difference between owner’s & lender’s title insurance? Both policies protect the recipient if there’s a defective title. The main difference is that Lender’s Title Insurance covers the lender and its interest in its collateral, loses value as the mortgage is paid, and expires when the mortgage is paid off. While Owner’s Title Insurance covers the land owner for the full amount of the purchase and does not expire upon the sale of the property.
Lender’s Title Insurance
If you are borrowing money from a mortgage lender, they will require you to purchase a Lender’s Title Policy, also called a loan policy. This policy protects the Lender’s investment in the property in the case of a title defect, it does not protect your investment. Most lender title insurance policies are standard and cover the common title defects that can arise, such as:
- Tax liens
- Contractor claims
- Unknown heirs or co-owners
- Debt claims against the property
Owner’s Title Insurance
To cover your investment in a property, it is also best practice to buy owner’s title insurance, or owner’s policy, in addition to the policy that lenders require you to buy. It will protect you from any claims against the title that predate the purchase of the property.
Below are a few things that every buyer needs to know about owner’s title insurance:
Title insurance is often regulated, but not always. Prices tend to be similar from provider to provider so make sure you check the exact coverages offered.
Owner’s Title insurance is a one-time cost and lasts as long as you own the property. This is usually issued at closing in the amount of the real estate purchase.
Buyer’s select the company for both owner’s & lender’s title insurance. This means that you can vet your own company or let your lender’s recommendation guide you.
The party responsible for paying for the insurance policy varies from state to state. Your lender typically includes this information as a part of the loan application & closing process
Baseline coverage includes fraud, forgery, unknown or undisclosed heirs and spousal claims. Any additional coverage requires a one-time fee.
Get A Free Title Insurance Estimate
Forgoing title insurance can put owners in a very difficult situation. Several issues can arise in a real estate transaction because there are several ways a previous owner could have claims on the property, such as unknown or missing heirs, mistakes in indexing recorded documents or forgeries and fraud. Without owner’s title insurance, buyers will have to shell out any cost to fix the title and could lose their investment entirely.
At Wooden Title & Escrow, LLC our real estate attorneys and accountants will ensure that you are completely covered in a real estate transaction. Contact us today to get a free estimate on title insurance.