Florida Broker Practice Exam

What is the nature of the lender's title insurance policy?

1. Issued for the sale price

2. Non-transferable

3. Issued for the loan amount

4. Available monthly

The correct answer is: Issued for the loan amount

The lender's title insurance policy is fundamentally designed to protect the lender's interests in the property, specifically for the amount of money they are loaning to the borrower. It provides coverage against any potential issues related to the title of the property that could affect the lender's security interest. This is typically equivalent to the loan amount, which ensures that, in the case of title defects or claims, the lender is protected up to the value of the loan. This policy is crucial for lenders because it mitigates the financial risks associated with lending, ensuring that they can recover their investment if any title flaws arise after the loan is issued. It focuses solely on the lender's position, rather than the overall property value or sale price. Other options may suggest different aspects or characteristics of title insurance policies. The option mentioning a sale price relates more to owner's title insurance than lender protection, while non-transferability typically applies to this policy since it is linked to the lender's interests directly and not meant for transfer to another party. The suggestion of monthly availability does not accurately reflect how lender's title insurance is structured; it is typically paid as a one-time premium at closing rather than on a monthly basis.