An insurance policy-protecting against loss should the condition of title to land be other than as insured.
In Texas, the two most common types of title policies are loan policies that protect lenders and owner policies that protect property buyers.
Most lenders will require you to buy a loan policy -- also known as a mortgagee policy -- if you want to borrow money for the property. This policy will repay the balance of your mortgage if a claim against your property voids your title. A loan policy covers up to the amount of the principal on your loan.
Loan policies are effective until you repay the loan. Most lenders will require you to buy a new loan title policy if you refinance your home. When the new loan pays off the existing loan, the old loan policy expires. You will get a premium discount on a new loan policy if you refinance within seven years.
Owner polices protect you from the risks listed in the policy. When you buy a house and purchase a loan policy, a title company will automatically issue an owner policy unless you specifically reject it in writing. The price of the policy is usually included in your closing costs. An owner policy only covers you up to the value of the property at the time you bought the policy. It doesn’t cover any increase in your property’s value, unless you buy an increased value endorsement.
An owner policy remains in effect as long as you or your heirs own the property or are liable for any title warranties made when you sell the property. You should keep your owner policy, even if you transfer your title or sell the property.