Lender's title insurance — also called a loan policy — is a title insurance policy that protects the mortgage lender's financial interest in the property against title defects, undiscovered liens, and other covered claims. It is required by virtually every mortgage lender in the United States — if you are financing your purchase, you will pay for a lender's policy at closing. The policy protects the lender's investment, not the buyer's.
The lender's policy amount equals the loan amount and decreases as the mortgage is paid down. For example, if you borrow $320,000 to buy a $400,000 home, the lender's policy covers $320,000. After 10 years of payments, when the balance is $260,000, the coverage has decreased to $260,000. When the mortgage is fully paid off, the policy expires — it no longer protects anyone because the lender no longer has an interest in the property.
If a title claim arises — such as a previously undiscovered lien, a forged deed in the chain of title, or a boundary dispute that affects the property's value — the lender's policy covers the lender's loss up to the remaining loan balance. The title insurance company also pays for the legal defense of the lender's position. However, the lender's policy does NOT protect the buyer — if a covered claim reduces the property's value by $100,000, the lender is made whole but the buyer absorbs the loss to their equity.
This is precisely why an owner's title insurance policy is so important. While the lender's policy is mandatory, the owner's policy is optional — but it is the only thing protecting the buyer's full investment. In many states, buying both policies simultaneously qualifies for a "simultaneous issue" discount, making the owner's policy significantly less expensive than purchasing it separately.
At Beycome Title, we provide both lender's and owner's title insurance policies at competitive rates, backed by Old Republic National Title Insurance Company — one of the nation's largest and most trusted underwriters. We strongly recommend owner's coverage for every buyer and can explain the costs and benefits specific to your transaction. Use our closing cost calculator to see title insurance premiums for your purchase price, or get your free personalized quote.