Owner’s vs Lender’s Title Insurance in New York: What Each Protects

If you buy with a mortgage in New York, there are usually two title policies. The lender’s policy (formally the loan policy) protects the bank’s mortgage. It is written for the loan amount and matters only while you owe the debt. The owner’s policy protects you. It is written for at least the price you paid and lasts as long as you own the property.

The lender requires its policy. The owner’s policy is your choice, and it is the only one of the two that pays you anything.

These rules are the same statewide, in New York City, Westchester County and the rest of New York State. The basics are in what title insurance is, and the parts of a policy are in the title insurance policy explained. This guide compares the two policies and covers cash purchases, refinances, co-ops and private loans.

Which forms New York uses

Since October 1, 2024, New York has used the 2021 owner’s and loan policies written by the American Land Title Association (ALTA), with New York endorsements. They are issued under the rate manual of the Title Insurance Rate Service Association (TIRSA) (Stewart bulletin). References such as “Condition 8” point to the matching part of the 2021 ALTA Owner’s Policy or 2021 ALTA Loan Policy, which New York’s forms are based on. Older policies are generally on the 2006 forms, which number some parts differently.

The two policies side by side

Owner’s policy Loan policy
Protects Your ownership The lender’s mortgage
Names You The lender
Amount Price or value Loan amount
Most it pays Amount or loss in value Also capped at what is still owed
Ends When you sell (with exceptions) When the mortgage is paid off
Passes to Heirs, some trusts Whoever buys the loan
Required by Nobody The lender
Usually paid by Buyer Buyer

Who each policy protects

The owner’s policy names you in Schedule A and insures the ownership you get through your deed. If a covered problem appears, such as a forged deed earlier in the property’s history or a lien the search missed, the insurer defends your title and pays your loss.

The loan policy names the lender and insures its mortgage as a lien on the property. It does not insure your equity. If you closed with only a loan policy, you have no title coverage of your own, even though you paid for that policy.

How much each policy pays

Owner’s policy. The TIRSA rate manual requires it to be written for at least the purchase price, or the fair market value if higher (see the cost guide). The Department of Financial Services (DFS) says it protects you “up to the full original sales price” and does not decline.

It does not grow either. The insurer pays the lower of the policy amount or the drop in your property’s value caused by the problem (Condition 8.a). That drop is measured on the date you discover the problem (Condition 8.b). If your home has doubled in value, the payout is still capped at the original amount. The optional market value endorsement addresses that gap (see what title insurance is).

Loan policy. It is written for the loan amount. DFS says its coverage “declines as the loan amount is reduced by mortgage payments.” In the policy, that happens through a cap, not a change to Schedule A. The insurer pays the lowest of the policy amount, the amount still owed on the loan, or the loss in value (Condition 8.a of the loan policy). As you pay the loan down, the most the lender can recover goes down too.

How long each policy lasts

Owner’s policy. Coverage lasts while you own an interest in the property. After a sale it continues only in two cases: you took back a mortgage from your buyer, or you remain liable on promises about the title you made in your deed (Condition 2). Otherwise it ends at the sale. It does not pass to the new buyer, who needs a new policy.

Some transfers keep your coverage alive, because the person receiving the property counts as an insured (Condition 1.g):

  • heirs and people who inherit under a will
  • the trustee or a beneficiary of your estate planning trust
  • a spouse who receives title in a divorce
  • a transfer on death beneficiary
  • an “Affiliate,” meaning an entity you wholly own or one with the same full owners

Moving property into an LLC is covered in deeding a NYC rental to an LLC. Quitclaims and transfer on death deeds are in transfer on death and quitclaim deeds.

Loan policy. It ends when the mortgage is paid off or released (Condition 10.c). So a refinance needs a new loan policy for the new lender. Your owner’s policy is not affected.

The loan policy follows the debt, not the original lender. If the loan is sold to another lender or investor, the policy goes with it (Condition 1.j). The insurer keeps some defenses, described in title requirements for private lenders. If the lender forecloses and takes the property, coverage continues while it owns the property (Condition 2 of the loan policy).

What the loan policy covers that the owner’s policy doesn’t

The first eight covered risks of the two policies closely match each other: someone else owning the property, liens and defects, title a buyer could refuse, no access, recorded enforcement of land use laws, and so on. The loan policy then adds risks that exist only because there is a mortgage:

  • A mortgage that isn’t valid (Covered Risk 9). For example, because of forgery or impersonation, a mortgage not properly signed or notarized, an invalid power of attorney, or a mortgage not properly recorded or indexed.
  • Priority (Covered Risk 10). Loss if the mortgage does not rank ahead of other liens as the policy says. A mortgage behind an earlier lien may not be repaid in a foreclosure.
  • Construction liens (Covered Risk 11). Priority over mechanic’s liens (liens the law gives for unpaid services, labor, materials or equipment) for work contracted for or begun by the policy date, or paid for with loan money later. It also covers priority over certain street improvement charges. For a New York construction or renovation loan, priority over later mechanic’s liens also depends on filing the building loan contract; see the building loan contract filing rule.
  • Assignments (Covered Risk 12). Loss if a transfer of the mortgage shown in Schedule A is invalid.
  • Undone transfers (Covered Risk 13). Loss if the mortgage is set aside or loses priority because an earlier transfer is undone as a fraudulent transfer. It also covers a recording failure that lets a bankruptcy court treat the mortgage as a preference (an unfair payment to one creditor ahead of others).
  • The gap (Covered Risk 14). Problems recorded between the policy date and the recording of the mortgage. It matches Covered Risk 10 in the owner’s policy.

The loan policy also has its own exclusions. It does not cover a mortgage being invalid because of interest rate limits (usury) or consumer protection law (Exclusion 5). It also excludes most bankruptcy and creditor claims arising from the loan itself (Exclusion 6).

Neither policy covers the money at closing. Misdirected loan funds and theft by a closing agent fall outside both; see closing protection letters in New York.

Who pays

The buyer. DFS says “the home buyer is generally responsible for paying for both policies.”

When both are issued together, the loan policy gets a reduced “simultaneous issue” rate and the owner’s policy is charged its normal rate. So the owner’s policy is most of the combined premium. Loan coverage above the owner’s amount is charged at the full loan rate. Worked examples are in what title insurance costs in NYC and Westchester. How both premiums appear on your bill is in the title bill explained.

Do you need both?

With a mortgage, you will pay for the loan policy regardless, because the lender requires it. Fannie Mae, for example, requires a title policy, or where allowed an attorney’s title opinion letter, on every loan it buys (Fannie Mae’s selling rules). No New York law requires you to buy an owner’s policy.

So the real choice is the owner’s policy. Without it, if a covered problem appears, no insurer defends your title and there is no policy to claim against. With it, you are covered for covered problems that existed at closing for as long as you own the property, and the insurer must defend covered claims (Condition 5).

How the answer changes by type of deal

Cash purchase. There is no loan policy. The owner’s policy, if you order one, is the only title insurance. If you later borrow against the property, the loan policy is priced as a refinance. The price on your deed can set the ceiling for the refinance discount.

Refinance. You need a new loan policy. Your existing owner’s policy keeps running, and no new one is needed because ownership hasn’t changed. Pricing is explained in TIRSA refinance rates.

Co-op. You receive shares and a lease, not a deed. The lender takes a pledge of the shares and files a UCC financing statement, a public notice of its claim, instead of recording a mortgage. Neither standard policy fits, and most New York City co-op purchases close on a lien search. Optional coverage exists, including the TIRSA Cooperative Endorsement on an owner’s policy and UCC insurance products some lenders require. See buying a co-op: the lien search. Condo units are real property and take the same two policies as a house.

Private or hard money loan. A private lender requires a loan policy for the same reasons a bank does, and the borrower usually pays. The usury exclusion, New York’s lack of closing protection letters and building loan filings matter more on these loans; see title requirements for private and hard money lenders.

What to check before closing

  • Names. The title report should name you for the owner’s policy and the lender, by its exact name, for the loan policy.
  • Amounts. The owner’s amount should match the price (or a higher value, if chosen). The loan amount should match the mortgage.
  • Schedule B of each policy. The two policies can list different exceptions. An exception on the owner’s policy leaves you uninsured for it, even if the lender’s policy leaves it out. See title search and title report.
  • Keep the owner’s policy. It matters long after the loan is gone. How claims work is in the title insurance claim process.

Details for attorneys and title professionals

What “owed” means. The loan policy’s cap uses “Indebtedness” (Condition 1.i). That is everything the mortgage secures, including principal, interest and collection costs, reduced by payments.

Value after foreclosure. If the lender takes title by foreclosure, the loss in value is measured on the date it acquired title, or the date its lien was wiped out or became unenforceable (Condition 8.b of the loan policy).

Official sources

Related guides

Korvane Title is preparing to launch in New York. It is not licensed as a title insurance agent and does not accept title orders. Content on this site is general information, not legal advice.