Real Estate Expert Q&A: Understanding the Necessity of Dual Title Insurance
New Homebuyer's Question:
“As we navigate our first home purchase, we're carefully budgeting for the down payment, closing expenses, and moving costs. Our loan provider’s closing cost breakdown listed 'Owner’s Title Insurance' as optional, yet mandated 'Lender’s Title Insurance.' What's the fundamental distinction, and why are both necessary? — Duane”
Protecting Your Homeownership Rights Through Title Insurance
“It safeguards your property against claims arising from defects in the 'title chain,' or the historical record of property transfers. This insurance shields against issues like fraud, errors in deed recording, undisclosed beneficiaries, forged documents, and unpaid liens that threaten your ownership.
Should a title discrepancy emerge, the insurance provider will rectify it, usually by providing legal representation or monetary compensation.”
Two Main Forms of Title Insurance
- Lender's Coverage – Securing the Loan
- Homeowner's Coverage – Protecting the Property Owner
Lender's Insurance
Typically borne by the buyer. “Most mortgage institutions insist that borrowers obtain a lender’s policy when securing a loan; this is to protect their financial stake. If title problems surface, the lender receives reimbursement for their losses.”
Owner's Insurance
Often covered by the seller. Without an owner’s policy, “the buyer is left vulnerable. While the lender's investment is protected, the homeowner risks losing their property or facing substantial legal difficulties. Therefore, acquiring owner’s title insurance is a crucial safeguard.”
Affordable Protection Against Potentially Costly Title Issues
Title insurance is a relatively modest expense, especially given that it covers the entire value of your home throughout your ownership. Furthermore, purchasing an owner’s policy often results in significant savings on the required lender’s policy, due to shared coverage.
"From my perspective as a practicing real estate attorney, I consider it imprudent to acquire real estate without securing an owner's title insurance policy.”
~ Insights from Board-certified real estate lawyer Gary Singer, featured as a contribution to the Sun Sentinel, published January 9, 2025.
