Title Insurance Policies

In Arizona, it is common for a title company to issue two title insurance policies:  1) the owner's policy and 2) the lender's policy.  Each plays a vital role in the home buying process, though the home owner only benefits from one of the policies.

The "ALTA" Homeowner's title insurance policy (which stands for the American Land Title Association), or the owner's policy as it is commonly referred to, is a standard title insurance policy that protects the home owner from any undetected clouds or defects of title that did not show up in the title search.  Generally this is paid by the seller of the home for the buyer.  This title insurance policy is based upon the sales price of the home.

The second type policy is issued by the title insurance company to protect the lender from any clouds or defects should they have to foreclose upon the home owner.  Often times it is referred to as an "ALTA" loan policy.  This policy protects lenders of all types who are making loans of their depositors', investors' or employees' funds and must obtain the security of a real property to protect the investment.  To obtain title insurance for its investment, a lender needs a valid, enforceable mortgage lien that has priority (also known as a first mortgage) over any known or unknown interests or claims to the property that is used as security for the note.  Title insurance provides the assurance which the lender needs by insuring that the home owner actually has title to the property and that no other entity or person has an interest that will affect the lender's security.  This title insurance policy is based upon the buyer's loan amount.

These types of policy provide for indemnity against loss or damage for undisclosed interests, ownerships, defects, liens or encumbrances on or affecting the property, or because of a lack of access to or from the property or for an alleged or actual unmarketability of title to the property.  In addition to insurance of the title, the ALTA loan policy insures the validity, enforceability and priority of the mortgage against the home.