September 05, 2018
What is the Difference Between Lender’s Title Insurance and Owner’s Title Insurance Policies?
In the world of real estate closings, I regularly deal with two different types of title insurance: Lender’s Title Insurance and Owner’s Title Insurance.
Fundamentally, these two types of policies cover the same thing: interests of ownership in a parcel of real property. They insure the title as clear from outside interests created by problems with locus in the past. Put simply, these policies back up the assertion that the interest in property that is being claimed in the transfer are, in fact, what is being conveyed.
But there are some differences in the interests these types of policy cover.
Owner’s Title Insurance Policy
This type of policy covers the interests of the purchaser of a property, whether or not they should need a loan. It basically insures that the title to the property is clear of defects, that there are no outstanding liens on the property, that the property can be reached legally via a right of access, and that the title to the property is marketable.
A purchaser’s rights are not covered by a loan policy. Lender’s Title policies only protect the lender’s rights. Should title come under attack, an owner who has not purchased an Owner’s Title Insurance Policy stands to lose a great deal, up to and including the property itself.
Lender’s Title Insurance Policy
This type of policy, which we sometimes also call a “loan policy” for short, we only issue to mortgage lenders. For most states, including Rhode Island, Massachusetts, and Florida, the American Land Title Association (ALTA) has delineated a particular set of protections that a loan policy should cover.
Basically, these cover costs of defending the loan in the case the title to the property comes in dispute or there is a lien or judgment that may have been missed in a title search. These protections are important if a lender must foreclose on a property, requiring the lender to attempt to put the property to market.
We at Topouzis & Associates, P.C. handle both Owner’s and Lender’s Policies. My associates and I put our considerable experience and expertise to use in ensuring that any title we service is issued clear of defect. Contact us if you want our professional judgment, backed up with a solid insurance plan.