Types Title Insurance
Lender’s Policy
The lender’s policy (often called a loan policy) is required by most lending institutions as a way to insure their security interest in the property from defects in title. This policy protects the bank or other lending institution for as long as they maintain an interest in the property (typically until your mortgage is paid off) and is in the amount of the loan provided by the lender. The lender’s policy will pay valid claims and legal fees to defend against hidden title issues. It also helps to decrease ownership risks by providing a thorough title search prior to the issuance of either policy.
The lender’s policy does not protect the owner of the property against loss of equity resulting from a defect in title.
Owner’s Policy
The owner’s policy which will protect your rights as the homeowner from defects in title for as long as you or your heirs have an interest in the property. There are two levels of owner’s title insurance: Residential Owner’s Policy (the “standard” policy) and the Homeowners Policy (the “enhanced” policy). The differences between the coverages of the two policies are set forth below.
| Protection from financial loss due to: | ALTA Standard Owner’s Policy (2006) | ALTA Homeowner’s Policy (2013) |
|---|---|---|
| Ownership Title: another party claiming an ownership in your home | X | X |
| Public Record Errors: issues relating to an improperly signed document or a document recorded inaccurately at the county recorder’s office | X | X |
| Fraud & Forgery: another party having rights in your property arising from forgery or false impersonation | X | X |
| Undisclosed Heirs: an unknown heir claims an ownership interest in your home | X | X |
| Liens: a creditor of the previous owner attempting to enforce a lien | X | X |
| Access: discovering you do not have actual physical access to your home | X | |
| Subdivision Law: loss from a violation of a subdivision law resulting in the inability to obtain a building permit * | X | |
| Building Permit: if you are forced to remove or remedy your existing structures, other than boundary walls and fences, because they were constructed without obtaining a proper building permit * | X | |
| Zoning: if you are required to remove or remedy your existing structures, other than boundary walls and fences, due to a violation of a zoning law * | X | |
| Encroachment: (your structures on neighbor’s property) your neighbor forces you to remove an existing structure(s), which encroaches onto neighbor’s land (boundary walls or fences are subject to a deductible) * | X | |
| Encroachment: (neighbor’s existing structures encroaching on your property) your property becomes unmarketable because someone refuses to perform a contract to purchase, lease it, or make a mortgage loan due to your neighbor’s structure encroaching on your land | X | |
| Encroachment: (neighbor creating encroachments after closing) if your neighbor builds any structures after the Policy Date, other than boundary walls and fences, which encroach on your land | X | |
| Encroachment: (your structures encroaching an easement) if you are forced to remove a structure which encroaches onto an easement or over a building set-back line | X | |
| Easements: loss arising from damage to an existing structure due to the exercise of a right to maintain or use the easement | X | |
| Surface Extraction: loss from damage to existing improvements due to the future right to use the surface of the land for the extraction or development of minerals or water | X | |
| Covenants, Conditions, Restrictions: if you are forced to remove or correct a violation by a previous owner | X | |
| Supplemental Taxes: supplemental or “roll back” taxes for a period before the policy date | X | |
| Continuation of Coverage: provides ownership coverage to anyone who inherits the property; a spouse who receives title upon dissolution of marriage; the trustee to whom the insured transfers title and the beneficiaries of a trust. | X | X |
| Automatic Increased Coverage: policy liability coverage increases 10% per year for 5 years to a maximum of 150% of the initial policy amount | X |