At the settlement table, purchasers often wonder why they are faced with purchasing both an owner’s title insurance policy as well as a lender’s policy. The difference is as follows:
An owner’s policy protects the policyholder from challenges to the legal rights to his or her property. The policy amount is equivalent to the sale price of the property, and increases only if the purchaser opts to purchase an enhanced policy, which provides more coverage as the property appreciates in value (up to 150% of the original purchase price). The policy covers the owner and its beneficiaries for life. The owner’s policy is an optional (but recommended) purchase at settlement.
In contrast, if the purchaser is financing their purchase, the purchaser’s lender will require the borrower to purchase a lender’s title insurance policy. Completely separate from the owner’s policy, the lender’s policy only protects the lender in the event that the property is foreclosed upon. In addition, the policy amount is equal to that of the lender’s security amount – as the mortgage is paid off, the amount of the policy decreases. When the mortgage is paid in full, the lender’s policy is null. Whereas the owner’s policy is optional, the lender’s policy is mandated by the lender.
If you are in the process of purchasing a home, call Highland Title today at (703) 723-3300 to discuss your options for purchasing title insurance.