ALTA Practice Exam – Complete Prep Resource

The distinction between owner's title insurance and lender's title insurance is fundamentally rooted in the protection each type of insurance provides. Owner's title insurance is designed to safeguard the property owner’s investment by covering them against potential ownership disputes or issues that could arise concerning the title of the property. This includes risks like undisclosed liens, ownership claims from previous owners, or boundary disputes.

On the other hand, lender's title insurance specifically protects the lender's financial investment in the property. When a lender provides a mortgage to a borrower, they want to ensure that their lien on the property is valid and secure. Lender's title insurance covers the lender in the event that there are claims against the title that could affect their ability to recover the loan amount if the borrower defaults.

Therefore, the correct answer highlights that owner's title insurance focuses on the interests of the property owner while lender's title insurance secures the lender’s financial interests. This differentiation is essential for understanding the roles these insurances play in real estate transactions and protecting varying parties involved in such agreements.