Which statement correctly describes the two standard title insurance policies?

Which statement correctly describes the two standard title insurance policies?

• A. Owners Policy protects vested free and clear title
• B. Lenders Policy Follows loan if it's sold in the secondary market
• C. Both statements are correct
• D. Neither statement is correct

Answer: (C)

Two standard title insurance policies are involved: the Owner’s Policy and the Mortgagee’s (Lender’s) Policy. The Owner’s Policy protects the owner’s title to the property, ensuring the ownership interest is properly vested and covered against defects that existed at the policy date. It helps maintain marketable title for the owner, with coverage up to the insured amount for losses caused by covered title defects, subject to the policy’s exclusions and exceptions. The wording about protecting vested free and clear title aligns with this idea: the policy protects the owner’s title as vested, not guaranteeing absolute free-and-clear status forever, but providing protection against covered defects that could cloud ownership. The Lender’s Policy protects the lender’s security interest in the property for the amount of the loan. It covers defects that could impair the lender’s lien or its priority rights. Importantly, it “follows the loan” in the sense that the coverage remains tied to the loan even if the loan is sold or assigned in the secondary market, so the new loan holder’s security remains protected by the policy. Because both descriptions accurately reflect how these two standard policies function, the correct conclusion is that both statements are correct.

Two standard title insurance policies are involved: the Owner’s Policy and the Mortgagee’s (Lender’s) Policy. The Owner’s Policy protects the owner’s title to the property, ensuring the ownership interest is properly vested and covered against defects that existed at the policy date. It helps maintain marketable title for the owner, with coverage up to the insured amount for losses caused by covered title defects, subject to the policy’s exclusions and exceptions. The wording about protecting vested free and clear title aligns with this idea: the policy protects the owner’s title as vested, not guaranteeing absolute free-and-clear status forever, but providing protection against covered defects that could cloud ownership.

The Lender’s Policy protects the lender’s security interest in the property for the amount of the loan. It covers defects that could impair the lender’s lien or its priority rights. Importantly, it “follows the loan” in the sense that the coverage remains tied to the loan even if the loan is sold or assigned in the secondary market, so the new loan holder’s security remains protected by the policy.

Because both descriptions accurately reflect how these two standard policies function, the correct conclusion is that both statements are correct.