Owner's Policies

There are two main types of title insurance policies. The first, called an owner’s policy, is purchased by and for the protection of the owner of a property. The policy assures the purchaser that there are no defects, liens or encumbrances on the property, and will pay the purchaser if he or she loses access to the property due to a title issue. In most cases, the limit of an owner’s title insurance policy is the amount paid for the property at purchase. An owner’s policy is usually purchased as part of the real estate transaction. In some cases, depending on local regulations, the property seller can pay the premium on behalf of the buyer.

Most mortgage lenders require the purchase of title insurance to protect their interests in a real estate transaction, but fewer purchasers know and understand the benefit of having an owner’s title insurance policy for their own interests. The type of title insurance policy required by mortgage lenders is similar to mortgage insurance in the sense that the property owner pays the premium, but the protection is for the lender, not the owner. In contrast, an owner’s policy protects the interests of the owner if a lien or other title problem is discovered, and any insurance payment would be to the owner him or herself.

It is important to note that having such a policy does not excuse the need for a good title search prior to purchasing any real estate. In fact, in most cases, the title insurer will conduct such a search prior to underwriting the policy, though policy terms may differ according to state and company.

This type of policy is usually a one-time purchase, made at the time the property is acquired. It is generally not a required part of the real estate transaction. However, the insurance provides coverage for the entire period that the property is owned by the purchaser or his or her heirs, which can be valuable protection if a title issue is discovered.