Lender’s vs. Owner’s Policy: Aren’t They the Same Thing?!

By Hayley Baldinelli, J.D., Closing Manager at Preferred Settlement Services

The Critical Difference Most Sarasota Buyers Miss

Many homeowners assume their lender’s policy protects them—after all, they’re paying for it, right? Here’s the catch: Lender’s insurance only covers the bank’s financial interest (i.e., the loan amount), which shrinks as you pay down your mortgage. Meanwhile, your equity grows—but without an owner’s policy, that investment is vulnerable.

Real Sarasota Scenario: A Siesta Key condo buyer relied solely on their lender’s policy. Five years later, a previously unknown heir claimed partial ownership from a 1990s probate error. The bank’s policy didn’t apply—but the owner’s policy covered $85k in legal fees and preserved their full ownership.

Why This Happens in Florida:

• Complex Histories: Older homes (common in Laurel Park or Gillespie Park) often have tangled title chains.
• Rapid Development: New construction can inherit liens from previous land disputes.
• Investor Activity: A large percentage of investors purchase homes all cash—buyers skip lender’s policies but still need owner’s coverage.

Get more resources from the Florida Department of Financial Services Title Insurance Guide

What’s the Difference?

Comparison	Lender’s Title Insurance	Owner’s Title Insurance
Who It Protects	The mortgage company	You (the homeowner)
Coverage Duration	Until the loan is paid off	As long as you/heirs own the home
Required?	Yes (by lenders)	No, but highly recommended

Key Takeaway: Lender’s insurance disappears when you refinance or sell—owner’s coverage lasts forever.

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Why Lender’s Insurance Isn’t Enough

Lender’s policies only protect the bank’s investment. Example risks you still face:

• A previous owner’s unpaid HOA fees (common in Sarasota condos).
• A forged deed from a decades-old transaction.
• Survey errors showing your pool encroaches on a neighbor’s lot.

Real-Life Case: A Sarasota family lost $50k in legal fees fighting an heir’s ownership claim—their lender’s policy didn’t help.

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How Owner’s Title Insurance Protects You

• Covers legal defense costs (even for frivolous claims).
• Reimburses you if you lose equity due to a covered defect.
• Includes post-closing protection (e.g., a lien pops up 5 years later).

Pro Tip: Ask about a simultaneous issue rate—it’s cheaper to bundle owner’s + lender’s policies at closing.

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Cost Comparison: Is It Worth It?

Let’s Compare	Lender’s Policy	Owner’s Policy
Typical Cost	$500–$1,500	$1,000–$3,000 (one-time fee)
Pays For	Bank’s loan amount	Your home’s full value

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Florida-Specific Title Risks

Sarasota homeowners face unique threats:

• Probate sales: Undisclosed heirs may emerge.
• Old subdivisions: Confusing boundary lines (e.g., Palmer Ranch).
• Hurricane liens: Unpaid post-storm assessments from prior owners.

Did You Know? Florida has no state-run title insurance—always choose a reputable provider. Preferred Settlement Services partners with creditable underwriters such as Old Republic Title and Chicago Title Insurance Company.

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