Lender’s title insurance will most likely be required by the company who is providing the mortgage for the home. Lender’s title insurance only protects the lender as the financier of the property. It protects the lender from any claims on the title for the property that the buyer is purchasing. Since the lender owns the property until the buyer has paid them back, this policy provides extra security for them, knowing that their investment is insured.
In contrast, the owner’s title insurance policy protects the buyer in case someone tries to make a claim on the property that was purchased. A prospective buyer may not be aware of any defects in the title of the property that existed before purchasing it. The owner’s title insurance policy would protect against from financial loss such as legal fees related to such defects or claims.
In any real estate transaction, while the title company does conduct an exhaustive search of all of the past owners of the property and does their best to make sure any title issues are cleared up and handled, it is not foolproof and that’s where title policy comes in to play.