Which type of insurance would be critical for a lender to protect itself against unanticipated property title defects?

Which type of insurance would be critical for a lender to protect itself against unanticipated property title defects?

• A. Private Mortgage Insurance
• B. Homeowner's Insurance
• C. Lender's Title Insurance
• D. Liability Insurance

Answer: (C)

Lender's title insurance is essential for protecting lenders from potential losses due to defects in the title of a property. This type of insurance covers issues that may arise after the property purchase, such as undiscovered liens, ownership disputes, or errors in the public record. By obtaining this insurance, the lender ensures that their financial interest in the property is safeguarded against these unforeseen issues, providing them with a layer of security that is crucial when financing real estate transactions. Other types of insurance, such as private mortgage insurance, homeowner's insurance, and liability insurance, serve different purposes. Private mortgage insurance primarily protects the lender when the borrower has a low down payment, while homeowner's insurance protects the homeowner against loss or damage to their property. Liability insurance, on the other hand, covers the costs associated with claims of injury or property damage but does not address title-related concerns. Thus, for lenders specifically looking to mitigate risks related to title defects, lender's title insurance is the most appropriate choice.

Lender's title insurance is essential for protecting lenders from potential losses due to defects in the title of a property. This type of insurance covers issues that may arise after the property purchase, such as undiscovered liens, ownership disputes, or errors in the public record. By obtaining this insurance, the lender ensures that their financial interest in the property is safeguarded against these unforeseen issues, providing them with a layer of security that is crucial when financing real estate transactions.

Other types of insurance, such as private mortgage insurance, homeowner's insurance, and liability insurance, serve different purposes. Private mortgage insurance primarily protects the lender when the borrower has a low down payment, while homeowner's insurance protects the homeowner against loss or damage to their property. Liability insurance, on the other hand, covers the costs associated with claims of injury or property damage but does not address title-related concerns. Thus, for lenders specifically looking to mitigate risks related to title defects, lender's title insurance is the most appropriate choice.