The lender's policy
The lender's policy protects the bank or investor that makes the loan. It covers their lien position if a title defect threatens the mortgage. Lenders require it on nearly every purchase loan, and the borrower typically pays the premium as a closing cost.
The coverage amount follows the loan balance and shrinks in practice as the loan is paid down. It does not protect you personally.
The owner's policy
The owner's policy protects your ownership interest and covers defense costs if a covered claim is made. It is separate and often optional, although in some deals the contract assigns who pays. It lasts as long as you or your heirs hold an interest in the property.
Because the owner's policy is a one-time premium, you decide at closing, not later. Ask about it early.
Examples of covered problems
Common covered risks include forged signatures in the chain of title, undisclosed heirs, errors in public records, unpaid prior liens and recording mistakes. These are hidden defects that a search may not catch.
The policy does not cover everything. Matters listed in the exceptions, new problems you cause after closing, and zoning issues are typically excluded.
Reading the commitment
Before closing, the title company issues a commitment. Review Schedule B, which lists exceptions and requirements. Requirements are things that must be fixed before the policy issues, such as paying off a prior mortgage or recording a release.
Ask the title officer to explain any exception that worries you.
Costs and shopping
Premium rules differ by state, and in some states the rates are filed with a regulator. In others you can compare quotes. Your Closing Disclosure lists title charges, and some are services you may shop for. A signing agent cannot recommend a policy. Ask your attorney or title company, and keep the policy once it arrives, since you may need it on a refinance or sale.
A sample timeline and questions to ask your title officer
Early in the process the title company searches records and issues a commitment. Any problems found, such as an old mortgage that was never released, are listed as requirements. They must be cleared before closing for the policies to be issued without that exception.
At closing, premiums are collected. Weeks later, the final policies arrive by mail or electronically. Store the owner's policy with your deed and closing papers, since you may need it if a claim arises.
What exceptions are in Schedule B and what do they mean? Is there a survey exception? Are any prior owners' liens still open? Is there an extended coverage option? What happens if someone claims an interest in the property? Their answers will tell you what the policy actually protects.
Refinancing can raise the question again. A new lender will require its own policy for the new loan, but your existing owner's policy typically continues. Some title companies offer a reduced rate for a new lender's policy if you recently bought. Ask whether you qualify, and keep your original owner's policy with your records.
Common questions
Do I need both policies?
Lenders require their own policy. The owner's policy protects you and is often optional, so discuss it with your agent or attorney.
Is title insurance renewed yearly?
No. It is generally a single premium paid at closing.
Can a notary advise on title insurance?
No. Notaries identify signers and notarize documents. Title questions go to the title officer.
This guide is general information, not legal advice. Fees and procedures change; check with the office involved or an attorney for your situation.