1. A lender's title insurance policy protects:
Answer & explanation
Answer: B. A lender's (mortgagee's) policy protects the lender's interest up to the loan amount and declines as the loan is paid. An owner's (fee) policy protects the owner.
property
title insurance
Insurance that protects the policyholder against financial loss from covered defects in title that existed before the policy date, such as forgeries, undisclosed heirs, or recording errors. It is paid once at closing. An owner's policy protects the buyer, while a lender's policy protects the lender up to the loan balance. Policies list exceptions that are not covered.
- Exam tip
- Title insurance looks backward to past defects, paid with one premium. The lender's policy decreases with the loan; the owner's policy protects the owner's equity.
- Example
- Years after closing, a long-lost heir claims part of the property; the owner's title insurer defends the claim and pays the loss.
Related terms & state variants
Sources
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Last verified: 2026-10-23