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Why Do I Need an Owner’s Title Policy and What are the Differences in an Owner’s and Lender’s Title Policy

If you’re looking to buy real estate, you should seriously considering purchasing title insurance as well.

Title insurance is crucial as it protects the owner, or the lender, in cases where a dispute might arise about who holds legal title to the property. If questions arise about the validity of the title, the insurance will cover the cost of the property.

An owner’s title policy isn’t required but it is advised, as it is a great safety net. The policy is purchased for a one-time fee at closing and is in place for as long as you have an interest in the property.

So why do you need an owner’s title policy? The policy protects you should the title given to you be invalid, encumbered with a prior debt or lien or should there be issues that affect the value of the land. Other problems could include: undisclosed heirs, mistakes in examining records, errors or omissions in deeds and forgery.

A lender’s title policy provides protection for the mortgagee and banks generally will require a home buyer to purchase this policy before obtaining a mortgage. Lender’s title insurance protects the lender against problems with the title of your property, i.e., if someone sues saying they have a claim against the home.

Lender’s insurance doesn’t protect the equity in your home. Should someone sue with a claim against your home, you will be held responsible. The lender’s title insurance policy only covers claims that impact the lender’s loan.

January 23, 2017

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