What is the primary purpose of a loan policy in title insurance?

The primary purpose of a loan policy in title insurance is to protect the lender. When a lender provides a loan for the purchase of property, they often require title insurance to ensure that their financial interest in the property is safeguarded. This means that if any title issues arise, such as liens, claims, or defects that were not disclosed during the transaction, the lender will be covered for any potential losses up to the full amount of the loan.

The loan policy typically does not extend the same level of protection to property owners or investors, as it is specifically designed to address the lender's risk associated with the loan. While a property owner may have a separate owner's title insurance policy for their protection, and municipal interests might be considered in other contexts (like zoning or property taxes), the loan policy primarily reflects the lender's bottom line, ensuring that their investment remains secure and free from unforeseen legal complications.

In summary, the purpose of a loan policy in title insurance is centered on protecting the lender's interests against any issues that may arise regarding the title of the secured property.