What is it?
Lender’s title insurance is indemnity insurance protecting the lender of your home loan against problems with the title of your home. Lender’s title insurance only protects the lender. You should purchase owner’s title insurance to protect yourself against the same types of claims.
What problems can come up?
A clear title, free of any defects, is necessary for any real estate transaction. The title companies do a search before they will sell the insurance to double check there are no outstanding issues.
Typical problems that can arise are outstanding liens that pop up after you own the home, encumbrances, defects of title, or an outright claim of ownership of the property. These can take the form of back taxes, conflicting wills, previous defaults on home loans, ownership by another party, incorrect signatures on documents, past forgery or fraud, flawed records, restrictive covenants such as unrecorded easement or access rights that may reduce the value or enjoyment of the property and judgements against the property from outstanding lawsuits and liens. Two more common defects of title are inaccurate or false surveys — muddying the property boundaries and unresolved building code violations requiring expensive remedy or judgements.
