Do I need an owner's title policy if my lender already requires one?

The two policies are often confused because they are issued at the same closing, on the same search, out of the same file. They insure different people. The lender's policy names the mortgage holder as the insured and its amount declines with the loan balance.

Consider a purchase at one million dollars with a seven hundred fifty thousand dollar loan. If a claim arises after ten years of payments, the lender's policy responds to the outstanding balance and the lender's loss. The equity built up over those ten years is not insured by that policy.

An owner's policy also carries the duty to defend. If a party claims an interest in the property, the insurer defends the covered claim at its cost. Without an owner's policy that defense is paid out of pocket, which on a contested chain of title issue is the larger exposure.

When an owner's policy and a lender's policy are issued on the same transaction, the lender's policy is written at a simultaneous issue rate, so taking both at once is materially less than buying them separately. Ask for both numbers side by side before you decide.