Understanding Title Insurance: Owner’s Policy and Lender’s Policy

Buying, Selling / By

Title insurance is essential in real estate transactions, protecting against potential title defects. There are two main types: owner’s policy and lender’s policy.

Owner’s Policy

The owner’s policy protects the buyer’s ownership rights to the property. This insurance ensures that the buyer is safeguarded against any claims or legal disputes over the property’s title. It covers issues such as:

– Fraudulent claims: Protection against forged documents or false claims of ownership.

– Liens: Coverage against unpaid property taxes or contractor fees.

– Errors: Defense against clerical errors or mistakes in public records.

This policy remains in effect for as long as the owner or their heirs hold an interest in the property.

Lender’s Policy

The lender’s policy, also known as a loan policy, protects the lender’s interest in the property. It ensures that the lender has a valid and enforceable lien on the property. This policy covers:

– Priority disputes: Ensures the lender’s claim takes precedence over other claims.

– Title defects: Protects against issues that could invalidate the lender’s lien.

– Loan amount: Covers the mortgage amount, providing security to the lender.

The lender’s policy is typically required by mortgage lenders and remains in effect until the loan is paid off.

While both policies offer crucial protections, the owner’s policy focuses on safeguarding the buyer’s ownership rights, and the lender’s policy ensures the lender’s financial interest is secure. Together, they provide comprehensive protection in real estate transactions.

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