Title Insurance. Who is it for? Do I Need It?

Title insurance is a type of insurance that protects the holder from financial losses that may occur from defects in a property's title. In the mortgage industry, there are two types of title insurance: lender's title insurance and owner's title insurance.

Lender's title insurance, also known as a mortgagee policy, is typically required by the lender as a condition of the loan. This policy protects the lender in the event that a defect in the title is discovered after the loan is made. It also covers legal expenses in the event that the lender needs to defend their interest in the property.

Owner's title insurance, also known as an owner's policy, is optional but highly recommended for the buyer. This policy protects the buyer's financial interest in the property. It covers any financial losses that may occur as a result of a defect in the title that was not discovered during the title search. This can include issues such as outstanding mortgages, taxes, or liens on the property. Additionally, it provides coverage for legal expenses in case of a legal dispute over the property title.

When purchasing a property, it is typical for the buyer to pay for both the lender's title insurance and owner's title insurance. The cost of these policies may vary depending on the location and value of the property, as well as other factors.

It is important to note that title insurance is not a substitute for a title search, which is a separate process that is done to uncover any issues with the title. A title search is typically conducted by a title company or attorney and is an important step in the home-buying process to ensure that there are no defects or issues with the title.

In conclusion, title insurance is an important aspect of the mortgage industry that protects both the lender and the buyer from financial losses that may occur from defects in a property's title. The lender's title insurance is typically required by the lender and covers the lender's financial interest in the property, while the owner's title insurance is optional but highly recommended for the buyer, it covers the buyer's financial interest in the property and also provides coverage for legal expenses in case of a legal dispute over the property title.