Free practice questions · Course 3
Title Issues and Title Insurance Practice Questions
Common title defects, survey issues, and the role of title insurance. Below are 5 free sample questions from our 30-question Title Issues and Title Insurance bank. Each comes with the correct answer and a full explanation.
Question 1 of 5
Why might a buyer's lawyer recommend title insurance even after performing a thorough title search?
- ABecause title insurance prevents the buyer from being sued for the deposit
- BBecause some defects, such as fraud and certain off-title issues, can exist despite a careful search
- CBecause title insurance replaces the need to register a deed
- DBecause title insurance pays the buyer if the home loses market value
Why B is correct
Title insurance covers known and unknown defects of record as well as certain off-title risks. It complements but does not replace the lawyer's title search.
Question 2 of 5
Who normally pays the one-time premium for an owner's title insurance policy in a residential resale transaction?
- AThe vendor (seller)
- BThe listing brokerage
- CThe buyer
- DThe municipality where the property is located
Why C is correct
Title insurance is paid by the buyer (and lender, where applicable) as a one-time premium. The owner's policy continues for as long as the named owner has an interest in the property.
Question 3 of 5
Which of the following statements about the duration of an owner's title insurance policy is MOST accurate?
- AIt lasts only one year and must be renewed annually
- BIt typically lasts as long as the named insured (or their estate) has an interest in the property
- CIt expires when the original mortgage is fully paid off
- DIt is automatically transferred to the next owner when the property is sold
Why B is correct
Owner policies extend coverage for the duration of ownership and may continue for an estate. Lender policies generally last for the term of the mortgage.
Question 4 of 5
Which of the following best describes an 'encroachment' as a title issue?
- AA registered easement permitting a utility to cross the land
- BA structure that physically extends from one property onto another
- CAn outstanding municipal property tax arrear
- DA restrictive covenant prohibiting commercial use
Why B is correct
Encroachments are usually discovered through a current Real Property Report (survey) or by physical inspection. Title insurance often covers encroachment risks instead of requiring an updated survey.
Question 5 of 5
Mateusz Yamasaki's lawyer obtains 'gap insurance' as part of the title insurance policy. What does gap insurance cover?
- AThe difference between the purchase price and the appraised value at closing
- BUnknown registrations or claims that arise between the title search date and the actual registration of the transfer
- CThe shortfall if the lender forecloses and sells the property for less than the mortgage balance
- DThe replacement cost of the home if it is destroyed by fire
Why B is correct
Gap coverage is a key benefit of title insurance because the search-to-registration gap can otherwise leave a buyer or lender exposed to last-minute encumbrances such as judgments or construction liens.
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