The title insurance process can be complicated, which is why it is important to determine the differences between each type of policy. Having this information can be quite beneficial, and it may help clarify the title process, which is a necessary aspect of purchasing an existing property.

Title insurance ensures that homeowners and lenders are covered during the mortgage process, so that there are no issues once the home is closed and the owner moves in. A title professional conducts a title search to find any outstanding issues that may be present with the property. This can include a number of problems such as outstanding bills, taxes owed or ownership conflicts.

The title search may not come up with anything, or there may be issues that are resolved during the process. The new owner then moves in, and problems still may surface later on. Having title insurance can prevent the issue from becoming a major problem down the line.
 

Lender's Insurance
A lender takes out title insurance in order to protect their investment in the mortgage. The policy typically factors in the overall price of the mortgage. When the lender acquires this type of insurance – a common aspect of the home buying process – they will ensure that they will be covered if an issue arises at a later date. This insurance policy will have payments during the life of the mortgage, and it will be paid off before the loan itself is paid in full.

Owner's Insurance
Homebuyers also are encouraged to take out protection of their own. This option – called owner's insurance – will work to protect the home purchaser in a similar way. The fee is different than the lender, as the buyer will only need to make one payment at the time of the mortgage acquisition. Once this is done, the insurance will last as long as the mortgage, or the amount of time the person owns that property.

There are a number of reasons that a person needs title insurance. It is possible that there could be some sort of error with public documents, and some outstanding fees may have to be rectified. There also may be forged documents that are not legitimate, but tacked on to the property. Other people also may have claims to the home, which could cause an issue later on. Having title insurance protects the homebuyer from losing their investment in these situations.