A mortgage title insurance may NOT be issued for less than what amount?

Mortgage title insurance protects lenders against losses due to defects in the title of the property securing the mortgage. The value of the coverage is typically tied to the principal amount of the mortgage loan, which is effectively the amount the lender stands to lose if a title issue arises.

Issuing a mortgage title insurance policy for less than the full principal debt means that the lender would not be fully protected against potential claims that could arise if the title is found to be defective. In essence, if the title insurance coverage were lower than the full amount owed on the mortgage, the lender could face significant risks of financial loss without adequate recourse.

This requirement ensures that lenders have sufficient coverage to protect their investment, aligning the insurance amount with the financial interest they have in the property. Thus, the full principal debt accurately reflects the potential loss that title issues could pose to the lender, making it the minimum insurable amount.