There are two types of title insurance:
Lenders policy: which only protects the lender for the amount of the loan. If you are getting a loan, typically the lender will require this type of policy. But remember, it only protects the bank’s interest in the property.
Owner’s policy: which protects you, the homeowner.
What is Owner’s Title Insurance and do I need it?
An Owner’s Title Insurance policy protects you against a wide variety of problems affecting title to your new home. Things that if arise, could result in the loss of the property. Things like:
Errors in public records: such as old deeds and mortgages that were not properly recorded with the county.
Fraudulent deeds or missing heirs: for example, a grandson who forges his grandmothers name and coveys her property to himself. Or a separated spouse who’s former home was sold without their knowledge.
Unknown liens: Let’s face it, there have been tons of foreclosures in the past decade. Even if you aren’t buying a home out of foreclosure doesn’t mean there wasn’t one in the properties past. If the foreclosure was done improperly there could be missing liens that attach to your new property.
The list goes on and on. But you can protect yourself by purchasing an Owner’s Title Insurance policy at closing.
So What does it cost?
Unlike most insurance where you pay a monthly premium. An Owner’s Title Insurance policy is purchased with a onetime premium payment based on the purchase price of your new home that is paid at closing.
If your lender is requiring a lender’s title insurance policy, and you purchase an Owner’s Title Insurance policy, you won’t pay full cost for two insurance policies. Instead the lender’s policy will be offered to you at a highly discounted cost, called a simultaneous issue rate.