In what situation might a lender require a title insurance policy?

A lender typically requires a title insurance policy before approving a mortgage loan to protect their investment in the property. This policy safeguards against potential claims or defects in the title that could arise after the loan is issued, such as liens, undisclosed ownership interests, or errors in public records. By securing title insurance, the lender ensures that they can recover their money should any issues with the property title emerge, making it a critical step in the mortgage process.

In contrast, obtaining a title insurance policy is not a standard requirement when a property is sold, at the time of a rental agreement, or during property tax assessments, as these situations do not involve the same level of risk to the lender's financial interests in the property.