One of the most confusing aspects of closing on the sale of a home is title insurance. New homeowners often ask, “Why do I need to purchase it? Our bank already did.”
That’s a great question!
To help you get a clear picture of the difference between owners and lenders title insurance policies, we’ve put together a list of FAQ’s. Let’s start at the top.
That’s a great question!
To help you get a clear picture of the difference between owners and lenders title insurance policies, we’ve put together a list of FAQ’s. Let’s start at the top.
What are the Different Types of Title Insurance Policies?
There are two types of title insurance policies, owners and lenders. Almost all banks require mortgage borrowers to purchase lenders’ title insurance.
This insurance protects the lender against any title problems that could arise relating to the property’s title prior to the date of the policy.
Lender’s title insurance does not protect the borrower.
As long as the bank has an interest in the property, the lender’s title insurance policy remains in effect.
While lenders require borrowers to purchase lender’s title insurance, it is entirely optional for the borrower to purchase an owner’s policy.
Banks want to protect their investment. Why shouldn’t you? That’s why it’s a wise choice to buy an owner’s title insurance policy.
This insurance protects the lender against any title problems that could arise relating to the property’s title prior to the date of the policy.
Lender’s title insurance does not protect the borrower.
As long as the bank has an interest in the property, the lender’s title insurance policy remains in effect.
While lenders require borrowers to purchase lender’s title insurance, it is entirely optional for the borrower to purchase an owner’s policy.
Banks want to protect their investment. Why shouldn’t you? That’s why it’s a wise choice to buy an owner’s title insurance policy.
What Does A Standard Title Insurance Policy Cover?
A standard owner’s policy fully protects you from a title problem that did not surface during a title search. It also pays for legal fees while defending the claim against the property.
For example:
- A forged signature in a past title transfer
- Unpaid real estate taxe
- Liens against the property that were never resolved
- Incorrect signatures on legal documents
- Defective recording
- Judgments or encumbrances against the property
- Restrictive covenants
Extended Owner’s Policy—This insurance provides additional protection against more risks. To see a full list of coverage with Lilly Title & Settlement, see our homeowner’s title policy here which includes extended or enhanced policy coverage.
How Long is Title Insurance Good For?
When you make your one-time purchase at closing, you are covered for as long as you own your home. This is true for both owners and lenders title insurance policies.
For as long as your lender has an interest in the property, they are fully covered by their title insurance.
When you're ready to make the step into homeownership, turn to Lilly Title & Settlement for title insurance and real estate closings. Learn more about us here.
RSS Feed