How Title Insurance is obtained - lender's policy and owner's policy

 

To obtain title insurance, the buyer pays a one-time premium at the time of closing.  Title insurance comes in two forms - a lender's policy and an owner's policy.  The lender's policy protects the lender's interest in the property up to the face amount of the loan.  It covers errors made in connection with the title search conducted for the specific transaction and any prior defects in title.  The lender's policy is purchased by the buyer and is usually required as a condition of the loan.  However, the lender's policy does not protect the buyer from any title claims.  The policy remains in effect for the period of the loan, so if the property is sold or refinanced, a new lender's policy likely will be required.

 

The owner's policy protects the buyer's interest in the property from any claims with regard to title up the amount of the purchase price of the property.  Like the lender's policy, it protects against errors made in connection with the title search conducted for the specific transaction and any prior defects in title.  The owner's policy is optional and is purchased by the buyer.  Unlike the lender's policy, however, the policy remains in effect indefinitely (even if the property is refinanced or sold).