Your lender requires that they be provided with a lender’s title insurance policy (Loan policy) to protect their interest in your property up to the amount of the mortgage. While the premium for the loan policy is included in your closing costs, it does not protect you. Your ownership interests are insured only by an owner’s title insurance policy (Owner’s policy). While the lender’s coverage under the loan policy decreases as the mortgage is paid down and terminates when the final payment is made, your owner’s policy remains in effect for as long as you and your heirs own the property. An owner’s title policy is available for a one-time premium and at a discounted rate if purchased simultaneously with the loan policy at the time of closing. The owner’s policy provides coverage for numerous matters which are not discovered by a title search. Typical examples of such title problems include:
- Unrecorded liens
- Document/recording errors
- Forged documents
- The incapacity of a grantor
- Undisclosed or missing heirs
- Problems involving access to the land
Strongly recommended for homebuyers are value-added title insurance policies which provide you with additional protection for risks such as zoning and building permit violations, restrictive covenant violations, encroachments and defects in title.