There are two types of title insurance policies: an owner's policy that protects the buyer and a lender's policy that protects the lender. The lender's policy is almost always required when financing a purchase, while the owner's policy is optional but highly recommended. Title insurance is paid as a one-time premium at closing and remains in effect as long as the insured has an interest in the property.
A buyer purchases a home and obtains both an owner's title insurance policy and a lender's policy. Two years later, a previously unknown heir of a former owner files a claim against the property. The title insurance company defends the claim and covers any financial loss up to the policy amount.
Key exam distinction: owner's policy protects the BUYER, lender's policy protects the LENDER. Title insurance covers PAST defects, not future ones — this is the opposite of most insurance. A lender's policy decreases as the loan is paid down and expires when the loan is paid off, while an owner's policy lasts indefinitely.
Related Terms
Related Concepts
A deed is a written legal document that conveys (transfers) ownership of real property from one party to another. It must be delivered to and accepted by the grantee to be effective.
A general warranty deed provides the greatest protection to the grantee by guaranteeing that the grantor holds clear title and has the right to sell the property. It includes covenants that protect against all defects in title, even those arising before the grantor owned the property.
A special warranty deed guarantees that the grantor has not caused any title defects during their period of ownership, but does not warrant against defects that existed before the grantor acquired the property.
A quitclaim deed transfers whatever interest the grantor may have in a property without making any warranties or guarantees about the quality of title. It offers the least protection to the grantee.
A bargain and sale deed implies that the grantor holds title and possession of the property but does not include warranties against encumbrances or title defects.
Frequently Asked Questions
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