Lender’s vs. Owner’s Title Insurance Policies

When preparing to close on your home, you’re going to hear the term “title insurance” at some point during the process. There are two types of title insurance, Lender’s and Owner’s policies, and it’s important to know how each impacts your property. Typically required by your mortgage lender, a Lender’s title insurance policy covers their financial interest should title defects threaten your ownership stake in your home. Owner’s title insurance is entirely optional, but highly recommended for a number of reasons.

Purchasing owner’s title insurance is one of the best investments you can make when buying a new home. Owner’s title insurance protects you, the homeowner, from undiscovered title problems or defects that occurred before you owned the property. It offers financial protection and covers legal fees to defend your property interests in court in the event another person can claim an ownership stake in your home.

What Are Title Defects?

Title defects are issues that prevent proper transfer of ownership or rights to the property from one party to the next. Common title defects include:

• Mechanical liens
• Judgments
• Undisclosed heirs
• Unpaid taxes
• Fraud
• Forgery
• Clerical errors
• Improperly probated wills
• Incorrect legal descriptions

How Owner’s Title Insurance Serves to Protect You

When it comes to purchasing title insurance, you have the option of a standard or enhanced policy. As you might expect, an enhanced policy offers greater protection than a standard policy. Your title agent can provide further details on the coverage each policy type offers, but here’s a general overview of the differences between the two:

-Standard Owner’s Policy:

A standard policy covers the basics and most common of title defects, including clerical or recording errors, fraud, ownership claims by other parties and discovery of unknown heirs.

-Enhanced Owner’s Policy:

An enhanced policy protects against everything a standard policy covers, but also includes less common defects such as zoning, easement and encroachment issues, liens, forgery, additional tax assessments, lack of property of access and subdivision violations.

Even if the title search performed on your property was rendered free and clear of title defects initially, there’s always a possibility of a title problem arising in the future. Having an owner’s title insurance policy in place can bring peace of mind in such a situation.

Have question about Owner’s title insurance or the closing process? Talk to our team today!