Final answer:
A mortgagee's title policy is an insurance product that protects lenders from financial loss due to defects in the title of the collateral property. It covers the lender's interest and ensures their protection in case of the borrower's default or legal disputes over the property.
Step-by-step explanation:
The insurance in question is known as a mortgagee's title policy, which is specifically tailored to protect the interest of the lender or mortgagee. This type of policy safeguards against the financial loss that a lender might incur due to any defects in the title of the property that is held as collateral. Essentially, if there are any legal issues that arise challenging the lender's right to the property, this insurance policy would provide coverage.
For example, if the borrower defaults on the mortgage, this title insurance ensures that the lender's interest in the property is protected against any competing claims of ownership or outstanding legal liens. It is different from a standard owner's title insurance policy, which protects the buyer's equity in the property.
Copayment and cosigner have different functions in the realm of finance. A copayment is a payment made by an insurance policyholder on each service before the insurance covers the remainder, while a cosigner is someone who agrees to repay a loan if the primary borrower fails to do so.