"We have an owner's policy and a lender's policy. Let's unpack both of those and just speak to what they actually cover. I’ve got an owner's policy that protects the new buyer. We want to make sure that they own the property and that all the prior liens and mortgages from prior owners are all gone. The taxes are paid and things like access to the property, whether there’s any easements — that kind of thing. That's the owner's policy, and then you've got the lender policy. The lender policy protects the new lender — the new buyers — that their mortgage is in the correct position and there's no other mortgage liens that could jump in front of them.
I think of the owner's policy as kind of that knock on the door coverage, where somebody shows up a couple years down the road. I just bought this house and they're either claiming an interest in the property, suggesting that I don't have the right to use the property and the way that I want to use it. I can't access my property in the way that I thought I could or use the property in the way that I want to use it. I can't access my property in the way that I thought I could or you owe me money based on something that was done to the property or things of that nature. So it could be anything from the prior owner. They borrowed money from somebody and put a mortgage on it and never got paid off and the people come back two years later. Or it could be the neighbor coming next door and saying “oh by the way, I get to go across your property to get to part of my property.” And those are the types of things that title insurance protects you against (assuming that it isn't listed in the title and insurance as an exception).
So if we know about those — if we know the neighbor has the right to go across the property — we're going to put that in there and we're not going to insure about that but this is for kind of the unknown and we talk about the fact that the insurance is a lot of the legal defense. It's not just the cost of the property and a check for the value of the property, but who's gonna pay for the lawyers to defend you if that knock on the door comes — and that's what the title insurance is for. To be clear, it doesn't cover the structure; that's homeowners' insurance. This is the title and rights and things like that and it's unique to any other policy that's out there for the home."
