Illinois Real Estate Exam Practice Question
The purpose of private mortgage insurance is to
Correct Answer: B
Rationale: Private mortgage insurance (PMI) is designed to protect the lender in case the borrower defaults on the loan, making option B the accurate choice. This insurance mitigates the lender's risk, especially when the borrower has a low down payment.
Option A is incorrect as PMI does not cover loan repayment in the event of the borrower's death or disability; life or disability insurance serves that purpose. Option C is misleading since PMI does not cover property damage from fire or disasters; homeowners insurance addresses such risks. Lastly, option D is wrong because PMI does not protect against title issues; title insurance is specifically meant for that purpose.
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