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As we sit down on closing day to go through all of your real estate documents, you will notice on your closing statement that you are being charged for one of two different types of title insurance. Depending on whether you are the seller or the buyer you will be charged either owner’s title insurance or lender’s title insurance (presuming it is not a cash transaction). What is the difference and why do you have to pay for them?

Owner’s title insurance, often called an Owner’s policy, is a one time flat fee that the seller pays to the title insurance company for the benefit of the buyer. The title company is where the closing takes place. Although it is only a one-time payment, the insurance policy actually lasts as long as the buyer owns the property. The buyer will receive the owner’s title insurance policy for the amount of the sale price after the closing and it will list all of the benefits and restrictions of the policy. As a buyer you should keep this document in a safe place. This insurance policy is to protect you from a third party later claiming some type of interest in the property. Should this happen, contact a real estate attorney immediately to file a claim for you against your title insurance policy.

Lender’s title insurance, also known as a loan policy, is based on the actual dollar amount on the loan. As a buyer, your lender will require you purchase a title insurance policy to protect the lender from potential claims of prior third parties that may be senior to the lender’s secured interest in the property.  What this means is that, as a buyer, you have to pay approximately $500.00 as part of your closing costs (depending on the title company) so that the title company will issue a title insurance policy to your lender. You will not be able to get the loan without it.

Both of these charges are non-negotiable items that buyers and sellers will find on the closing statement. All of it will be further explained on closing day.