What is lender's title insurance?

Q: What is lender's title insurance?

Lender's title insurance covers the lender if someone later asserts a legal claim against the home. The Consumer Financial Protection Bureau (CFPB) says it does not protect your equity. Lenders usually require this policy to make the loan; an owner's policy is a separate purchase if you want coverage for yourself.

Short answer

Lender's covers the lender if someone later asserts a legal claim against the home. The Consumer Financial Protection Bureau (CFPB) says it does not protect your equity. Lenders usually require this policy to make the loan; an owner's policy is a separate purchase if you want coverage for yourself.

Full explanation

Lender's title insurance is a policy that pays the lender if a title defect threatens the loan—for example, if someone sues claiming an interest in the property. The CFPB explains that this coverage is usually required to get a mortgage.

It does not cover your investment in the home. If a claim arises, you remain the first person responsible for defending your ownership. The lender's policy only addresses claims that affect the loan itself.

To protect that equity, the CFPB notes that you may want to buy owner's title insurance as a separate policy. This is a general description of the two products, not a recommendation to buy or skip either one.

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