Title insurance is a contract that protects the policyholder from losses arising from defects in the title.  Title insurance is a unique type of insurance because it protects a policyholder against loss from an occurrence that has happend in the past.

Owner’s policy is issued for the total purchase price of the property.   The Owner’s policy insures buyers that the title to the real estate is free from all defects, liens, encumbrances, except those which are listed as exceptions in the policy or are excluded from the policy’s coverage.  It also covers losses and damages suffered if the title is unmarketable.   The policy is not transferable to another owner.

Lender’s policy is issued for the unpaid mortgage amount.  The Lender’s policy protects the lender against title defects.  Unlike the Owner’s policy, the Lender’s title insurance is transferable.  If the mortgage lender sells the mortgage to another investor, the title insurance is assignable to the new mortgagee.   The Lender’s policy will protect the new owner of the mortgage up to the unpaid balance of the mortage loan.  Most lenders require Lender’s title insurance as a condition of issuing a mortgage loan.