The paper presents digital closed loop fiber-optic current sensor (FOCT)’s optical path which combines integrated optical modulator and polarization beam splitter as optimum combination, as well as numerical analysis on insertion loss of traditional optical path scheme which consists of straight waveguide and optical path proposed by ABB. It shows that loss causes equivalent noise current which will affect the sensitivity of photo detector. The calculation and experiment confirm that loss of optical path is an important factor for FOCT’s sensitivity, and optical path composed of integrated optical phase modulator with Y-Branch profile and polarization beam splitter can effectively reduce the insertion loss and improve sensitivity of the system.