In almost every transaction where a lender receives a mortgage to secure repayment of their loan, the lender will require that the borrower buy a policy of title insurance to protect the lender. This is called a loan policy or lender’s policy of title insurance. This policy protects the lender against financial loss with respect to the priority, effectiveness, and enforceability of the Insured Mortgage, except with respect to matters excepted from coverage.
Owner’s Policy
It’s important to note that the loan policy only protects the lender. It does not protect the owner of real property.
Because of this, the person who buys a piece of property should seriously consider buying an owner’s policy for themselves. If the owner’s policy and loan policy are purchased at the same time there’s a significant savings because of the simultaneous issue rate.
Saving Money in the Long-Run
The owner’s policy actually protects the owner of an interest in real estate against financial loss caused by a matter affecting title, unless excepted from coverage.
If there is a claim against the real estate an owner may be called upon to spend attorney’s fees, as well as time and money to protect their title or to buy out that adverse interest. If the owner has an Owner’s Policy of title insurance, and somebody else claims that they own their property, the property owner can submit a claim and the title insurer will hire counsel to defend title to their property. This can save the owner thousands of dollars. The owner’s title policy has a one-time premium, so in effect, you buy 150 years of protection all at once.