“Title” is the legal ownership of the property. Lenders usually require borrowers to obtain title insurance to protect the lender against losses resulting from claims against the title. The lender’s title insurance policy, however, does not protect the property owner. If a claim is made it can be financially devastating to an uninsured owner.
And even though sellers are required to provide the new owner with a certificate of title, this certificate is merely an opinion issued by a title company or an attorney that the seller does indeed have good marketable and insurable title to the property which is being offered for sale. The opinion is issued after a cursory examination of the title and does not provide protection against any hidden defects in the title or property records. If some kind of defect were to surface at some future time, the examiner, or person who issued the certificate of title would be liable only for damages due to negligence. Lenders will always play it safe and will require title insurance on all real estate mortgage transactions.
Home owners looking for individual protection, may purchase their own title policy as well.
It is usually cheaper if you buy the lender’s policy and owner’s policy at the same time and with the same insurer. Also, make sure your policy has an inflation rider.
You may wish to consult your attorney or the settlement agent with any questions concerning obtaining an owner’s title policy.