Which type of insurance protects the mortgagee?

The correct answer is lenders title policy insurance because this type of insurance specifically protects the mortgagee, or lender, from any defects in the title of the property that could affect their security interest. When a lender provides a mortgage to a borrower, they want assurance that the title to the property is clear and that there are no unexpected claims or rights that could jeopardize their ability to collect on the mortgage.

Lenders title policy insurance covers potential issues such as liens, encroachments, or disputes regarding property ownership that may arise after the loan is issued. If a title defect is discovered, the title insurance can cover legal costs and any losses, providing reassurance to the lender that their investment is protected.

Homeowner's insurance primarily protects the homeowner and their personal property, not the lender. Mortgage life insurance provides a benefit that pays off the mortgage in case of the borrower's death but does not protect the lender against title defects. General liability insurance is designed to protect against claims of bodily injury or property damage, which does not relate to the interests of the lender regarding the mortgage. Thus, lenders title policy insurance is essential for safeguarding the lender's financial interests in the event of title-related issues.