Lender’s Title Insurance vs. Owner’s Title Insurance

Lenders’ and owners’ title insurance are confusing real estate terminology,
especially for people buying a home for the first time. Homebuyers must understand
the difference between these two terms. Here, we’ll break down these two real
estate terms.

What Is Lender’s Title Insurance?

Lender’s title insurance is a type of policy that protects a lender against losses due
to title defects on a property. It is typically required by a lender when they provide
financing for real estate purchases. The policy covers the lender if a dispute arises
over the title to the property, such as an undisclosed lien or claim. It also protects if
any title documents are fraudulent or invalid.

What Is Owner’s Title Insurance?

Owner’s title insurance is a type of insurance that covers the owner of a property
against losses resulting from defects in the property title. It is typically issued with a
loan transaction and covers both lender and owner interests. In addition, it protects
against claims or losses arising from matters that were not disclosed or discovered
during the title search process. Such matters include forged deeds, undisclosed
heirs, mistakes in public records, liens, and encumbrances.

Do I Need Both?

Yes, you need lender and owner’s title insurance. The lender’s title insurance
protects the lender in case there’s any issue with the property title. The owner’s title
insurance covers the homeowner. Owner’s title insurance is optional, but it is
recommended as it can provide financial protection against any unforeseen
property title problems.