Ask a real estate pro: Why do I need two types of title insurance?
First-Time Home Buyer Scenario
“We are buying our first home and are stretching our savings to pay for the down payment and closing costs, not to mention the moving expenses. Our lender sent us our closing cost estimate, which showed that “Owners Title Insurance” was optional, even though we were required to purchase “Lenders Title Insurance.” What is the difference, and why do we even need it, let alone both types? — Duane”
Title Insurance Protects Your Ownership of Your Home
“It covers claims against your property because of problems in its ‘chain of title’ or the series of historical ownership records for your home. This type of insurance covers problems due to fraud, mis-indexed or defective deeds, undisclosed heirs, forgeries, and unpaid liens threatening your ownership in your home
If there is a problem, the title insurer will fix it, usually by hiring attorneys on your behalf or by writing a check.”
Two Primary Types of Title Insurance Policy
- Lenders – Covers the Loan
- Homeowners – Covers the Homeowner
Lenders Policy
Typically paid for by the buyer. “Almost all mortgage lenders require borrowers to purchase a lender’s policy when getting a loan for a reason — they want to protect the money they are lending you. Under this type of policy, if there is a problem with the property’s title, the lender will get a check to cover the loss.”
Owners Policy
Typically paid for by the seller. Without an Owner’s Policy in place, “this leaves the owner in the lurch because while the lender is made whole, the property owner may not own the property they purchased or at least have a significant problem to deal with. This is where owners title insurance comes in and why it would be a mistake not to purchase the coverage.”
Relatively Inexpensive Coverage, on a Potentially Expensive Problem
“Title insurance is relatively inexpensive, considering it covers the entire purchase price of your new home for as long as you own it. Also, when you purchase an owner’s policy, you can buy the required lender’s policy at a massive discount since much of the coverage overlaps.
"Based on my experience as a real estate lawyer, I would never purchase a property without getting an owners title insurance policy.”
~ Input from Board-certified real estate lawyer Gary Singer, as featured as a Special to the Sun Sentinel, published Jan 9th, 2025
