Short answer
Title insurance protects the policy holder against claims over ownership from before the purchase, like unpaid taxes or contractor claims. A buyer's lender usually requires a lender's policy. An owner's policy protects the buyer's own investment. As the seller, your main role is delivering clear title.
Two kinds of policy
The Consumer Financial Protection Bureau explains that lender's title insurance protects the lender against problems with the title, and does not protect the buyer's equity. Owner's title insurance can protect the buyer if someone later sues and claims an interest in the home from before the purchase. Most lenders require a lender's policy. The CFPB says that in most cases the creditor does not require owner's title insurance.
Examples of covered problems
The CFPB gives examples of claims an owner's policy can address, such as a previous owner's failure to pay taxes or contractors who say they were not paid for work done before the purchase. For other specific coverage, read the policy itself or ask a title company. Policies have exclusions.
What this means if you are selling
As a seller, you sign a deed that says you have the right to convey the property. If a title problem turns up, it can delay the closing or reduce what you net. That is why sellers order a title search early. Liens, estate issues and unclear deeds are the usual problems. A seller does not usually buy a policy for the buyer's protection, but your title can affect the buyer's policy. If your title has a problem, the buyer's title company will raise it, and you may need to fix it before closing. That is why many sellers order a preliminary title report early. It is a way to see what the buyer's title company will see. Fixing a problem takes less time when you find it before there is a signed contract with a closing date.
Questions to ask the title company
Ask what policy the buyer is buying, and whether it is an owner's policy, a lender's policy or both. Ask what is excluded. Ask who orders the title search and who pays. Ask how the company handles estates, powers of attorney and old liens. Ask what documents you must bring, and ask for the list early. Ask whether the company has seen a problem like yours before. Ask when you will see the settlement statement. You can also ask a real estate attorney to review the contract. Title issues can cause late surprises, so ask early.
With a cash buyer
A cash buyer has no lender, so there is no lender's policy requirement. Whether the buyer purchases an owner's policy is up to the buyer. Kaizen Home Buyers buys houses as-is for cash, with no repairs and no agent commission. We make an offer within 24 hours and can close in 14 to 30 days or on your date. Call 267-329-0084. A real estate attorney can explain how the policy works at your closing.