The two types of insurance policies and how they work

Title insurance is a type of insurance that protects the buyer of a real estate property against losses that may occur due to defects in the title.

There are two types of title insurance: lender’s title insurance and owner’s title insurance. Lender’s title insurance covers only the lender, while owner’s title insurance covers both the borrower and lender.

Lender's Title Insurance

The purpose of lender's title insurance is to protect the lender against losses that may occur due to defects in the title. Lender's title insurance is required by most lenders before they will lend money on a property. The policy includes coverage for any losses resulting from invalid liens, unrecorded easements, unpaid taxes, etc.

Owner's Title Insurance

Owner's title insurance protects both the borrower and lender against loss caused by errors in a deed or other documents affecting ownership. It is not required by lenders but provides additional protection if an error is discovered after closing.

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