What is a lender's policy in title insurance designed to do?

A lender's policy in title insurance is specifically designed to protect the lender’s interests in a property that is being financed through a mortgage. When a lender provides a loan for the purchase of real estate, they want to ensure that their investment is secure. The lender's policy provides coverage against potential title defects or claims that could arise, which might jeopardize the lender's ability to recover the loan amount in the event of a default.

This policy typically covers the amount of the loan and protects the lender against risks such as undisclosed liens, claims of ownership, or issues related to the title that could impact the property’s value. It is important to note that while the lender’s title insurance is crucial for the lender's protection, it does not cover the interests of the borrower or any other party involved in the transaction.

In this context, the other choices do not accurately reflect the purpose of a lender’s policy. Protection for the seller’s interests, ensuring clear title for cash buyers, or providing coverage for all buyers represents focuses that lie outside the scope of what a lender’s policy is meant to address. The lender's title insurance focuses specifically on safeguarding the financial interests of the lender, making it a vital consideration in real estate transactions that involve financing.