Lenders vs. owner’s title insurance: What you need to know

On Behalf of | Oct 18, 2022 | Real Estate Law

When purchasing or selling a property, you will hear all about the importance of title insurance. However, you may not realize there is both lender’s and owner’s title insurance to consider. 

Understanding these differences will help you protect yourself in any real estate transaction. 

The purpose of lender’s title insurance

Lender’s title insurance protects a lender (the bank or organization providing the mortgage) against issues found with the property’s title. Things like mistakes in a past deed, hidden liens and even fraud cases can result in losses for a lender if the policy is not in place. With lender’s insurance, the lender is protected from losses caused by these issues and others. 

The purpose of owner’s title insurance

Just like a lender’s title insurance policy protects the lender, an owner’s title insurance policy protects the buyer or seller of real estate. This type of coverage is helpful if someone states they have a claim on the home and that it pre-dates the purchase. 

Sometimes, a previous owner may not have paid taxes properly, or a contractor may claim they were not paid for work done, which means they have a valid claim on the property. If you are in this situation, owner’s title insurance will protect you from the potential losses that you would face without it. 

Protecting yourself during a real estate purchase

If you have plans to buy or sell real estate, it’s a good idea to ensure that the proper title insurance is in place. Most lenders will require a policy to be in place to protect their interests but owner’s title insurance is often optional. Legal guidance can help you avoid serious mistakes with your real estate purchase.