The Difference Between Owner’s and Lender’s Title Insurance

Owner’s Lender’s Title Insurance guaranty corporation

Most people understand the necessity behind purchasing title insurance, but few know that there are two distinct kinds of title insurance, and even fewer know the differences between them. Owner’s and Lender’s title insurance are similar in nature but cover two different sides of a real estate transaction.

The Types of Title Insurance

There are two main types of title insurance: Lender’s and Owner’s. They both work essentially the same way (protecting the holder financially) but are designed to protect either the Lender or the Owner of the property.

Title insurance is a form of indemnity insurance, that protects both Lenders and potential Buyers from any financial losses resulting from defects in a title. When real estate is bought and sold, you need a title to confirm the transaction. During this process, title companies will do searches on titles to check for liens, claims to the property, and to confirm its legal ownership.

The role of title insurance is to protect the Lender and Buyer from the losses and damages that occur if a title is found to have liens, back taxes, etc.

Lender’s Title Insurance

Lender’s title insurance is a form of title insurance designed to protect the Buyer and the institution that lends the money for the purchase of the property. Though it is technically optional, most lenders in the US require the borrower to purchase Lender’s insurance to protect themselves in the event of a bad title.

The cost of Lender’s title insurance is typically calculated by considering the total price of the mortgage and is usually paid in parts along with the mortgage but is usually paid off well before it.

Essentially, Lender’s title insurance only protects the lender against financial loss.

Owner’s Title Insurance

Owner’s title insurance covers the owner of the property if an issue occurs with the home title. Owner’s title insurance is entirely optional and up to the homeowner to choose if they would like to be covered. Owner’s title insurance is also a one-time payment for the property owner (rather than over time) and covers the owner for the duration of the mortgage.

The Difference Between Owner’s and Lender’s Title Insurance

The main difference between the two types of title insurance, is who they cover in the event of an issue with the title of a property. Lender’s title insurance covers the Buyer and their Lender while Owner’s title insurance covers the homeowner only.

However, they both cover their respective parties against the same thing: financial losses due to any title issues like liens, unpaid debts, back taxes, etc. that could affect the transaction or involve fees that need to be paid.

The secondary difference between the two, is how the insurance is paid for. While Lender’s title insurance is paid off in segments over time, Owner’s title insurance is made in one payment (at the time of the mortgage acquisition) and is good until that mortgage is paid.

If you have any questions about title insurance, get in touch with one of the title and escrow specialists at Plymouth Title Guaranty Corporation.

Please note: The safety of our staff and clients is our highest priority.  Effective immediately, Plymouth Title Guaranty Corp. will be taking the following precautions to limit the spread of the COVID-19 virus:

All purchase transactions need to take place at a Plymouth Title Guaranty Corp. closing office

  • If a party to the closing is not feeling well, please contact your closer prior to the closing so appropriate precautions can be taken.
  • We ask visitors to utilize the restroom in our building upon arrival to thoroughly wash hands before entering our office.
  • Only individuals required to sign and/or deliver documents at closings will be allowed in our office. Specifically, closings will be limited to borrower(s), seller(s), agents, and lenders.
  • All pens used in the closing will be given to the client after use.
  • All closing rooms will be cleaned and disinfected in-between each closing.
  • Those picking up checks at our office will be instructed to call our main line and request to speak to a staff member who will plan for delivery to the lobby or parking lot of our office.
  • All staff will refrain from shaking hands before or after closings and ask clients do the same.

Please be advised that our staffing may be impacted during this unprecedented event. While we are committed to continuing to provide outstanding service, we ask for your patience in the face of this pandemic.