What is the difference between a lender's title policy and an owner's title policy?

• A. Lender's policy protects lender's lien priority; owner's policy protects buyer's equity.
• B. Lender's policy protects buyer's equity; owner's policy protects lender's lien priority.
• C. Both policies protect the same interests.
• D. Neither policy protects any financial interest.

Answer: (A)

Title insurance comes in two forms that protect different interests. The lender’s title policy is designed to protect the lender’s security for the loan—specifically the lender’s lien priority and the loan amount. If a title defect could threaten the lender’s ability to be repaid from the property, this policy steps in to cover losses up to the loan amount. It doesn’t protect the buyer’s equity.

The owner’s title policy, on the other hand, protects the buyer’s ownership and equity in the property. It covers defects that could threaten the owner’s title or reduce the owner’s stake in the property, up to the policy amount. So, the lender policy guards the lender’s financial interest in the loan, while the owner’s policy guards the buyer’s equity in the property.