Humber/Ontario Real Estate Course 3 Exam Practice

What is an accurate characteristic of title insurance in a real estate transaction?

1. It guarantees against future property defects.

2. It protects homeowners from title fraud.

3. It eliminates the need for a property survey.

4. It is mandatory for all real estate purchases.

5. It covers physical damages to the property.

6. It is typically included in home insurance policies.

The correct answer is: It protects homeowners from title fraud.

Title insurance plays a crucial role in real estate transactions by providing protection against various risks associated with property ownership. The characteristic that accurately describes title insurance is its protection against title fraud. This means that if a third party were to fraudulently claim ownership of the property or if there were issues stemming from previous ownership that could affect your rightful ownership, title insurance can offer recourse. Title fraud has become a more prevalent concern, and having title insurance can safeguard against financial loss arising from such instances. It ensures that the homeowner has legal protection should any fraudulent claims or discrepancies about ownership arise after the transaction is completed. While other options address various aspects of real estate, they do not accurately reflect the function of title insurance. For example, it does not guarantee against future defects in the property itself or physical damages, nor does it negate the necessity for surveys since those serve different purposes. Additionally, title insurance is not mandatory and does not usually come as part of home insurance policies. These distinctions help clarify why protecting against title fraud is the most accurate characteristic of title insurance in real estate transactions.