Title Insurance is a type of indemnity policy that protects lenders and homeowners from financial loss in the event title defects are identified after closing or the associated home loan becomes unenforceable. There are two types of Title Insurance policies: Lender’s Title Insurance and Owner’s Title Insurance.
Lender’s Title Insurance protects the mortgage lender’s financial stake against loss due to title problems. Owner’s Title Insurance protects the homebuyer’s/homeowner’s financial and real estate interests in the property.
Those new to the homebuying process, and even seasoned homebuyers, often have questions about Title Insurance. We’ve compiled a list of common and frequently asked questions regarding this topic.
Common Title Insurance FAQs
Is Title Insurance Required? Lender’s nearly always require homebuyers to purchase a Lender’s Title Insurance Policy. Choosing to purchase Owner’s Title Insurance is at the sole discretion of the homeowner; however, it’s highly recommended. (For more information, visit our Title Insurance section.)
What Does Title Insurance Cover? An Owner’s policy covers legal fees and other court costs to defend against another party posing an ownership claim to the property. Owner’s Title Insurance also provides monetary reimbursement on loss if title defects are unable to be resolved. Lender’s Title Insurance protects the mortgage lender in the event a loan is no longer considered valid.
Who Pays for Title Insurance? The homebuyer is financially responsible for the Lender’s Title Insurance policy. In many cases, the homebuyer also pays for Owner’s Title Insurance, though a portion of this may be negotiated into seller concessions. Both Lender’s and Owner’s Title Insurance policies are paid via a one-time premium.
How Are Coverage Amounts Determined for Title Insurance? An Owner’s policy is based on the sales price of the home. A Lender’s policy is based on the mortgage amount.
Can I use the same Title Insurance policy if I refinance my home? All lenders will require a new title insurance policy on any real estate transaction; however, homeowners typically receive a discounted rate on a Lender’s policy when refinancing.
What Is the Difference Between a Standard and Enhanced Owner’s Title Insurance Policy? When purchasing Owner’s Title Insurance, you have the option between a Standard or Enhanced policy. While both cover certain types of common title defects, an Enhanced Policy provides coverage for a wider range of title problems. Visit our previous post for more on Standard vs. Enhanced Owner’s Title Insurance.
Contact the Linear Title & Escrow team for more on Title Insurance!