Lien

What Does Lien Mean?

In the context of insurance, a lien is a legal claim that an auto insurance company, healthcare provider, or health insurance company has over settlement claims after paying the injured party’s bills.

More broadly, a lien is a security interest held by a creditor against a specific property. It is attached to the title of the property, such as a house or a car, and remains in place until the lien is satisfied. On a financed home, the mortgage lender is the lienholder and will require the borrower to keep homeowners coverage in place for as long as the loan is open, which is why many buyers compare the best homeowners insurance companies before closing.

Insuranceopedia Explains Lien

A lien is generally a legal claim or financial interest over property owned by a third party. The person holding the claim is known as the lienholder. A lienholder can be a creditor who provided a loan for the property purchase, a contractor who performed services for its completion, or even the government in cases where the property owner fails to pay real estate taxes. In most situations, the lienholder does not possess the property. For drivers with a car loan, the auto lender is the lienholder and gets paid first from any insurance settlement after a total loss. If the payout falls short of the remaining loan balance, the driver still owes the difference unless they carry standalone GAP insurance.

In the context of insurance, a third party who has paid the bills or claims of an injured party may file a case to request the court to enforce the lien. The court will then place a lien on the insured’s personal property to satisfy their liabilities to the insurance company. The lien remains attached until fully paid. Once the lien is settled, waived, or lifted, a lien release occurs, and the property is cleared for purchase.