Humber/Ontario Real Estate Course 3 Exam Practice

What is the key characteristic of title insurance that benefits property transactions?

1. It fully replaces the need for a survey.

2. It excludes any discovered issues before closing from being covered.

3. It provides protection for actual losses and covers related legal expenses.

4. It mitigates risks related to property boundaries.

5. It is only applicable post-closing issues.

6. It is mandatory for both buyer and seller.

The correct answer is: It provides protection for actual losses and covers related legal expenses.

The key characteristic of title insurance that benefits property transactions is that it provides protection for actual losses and covers related legal expenses. This means that in the event there are issues with the title of the property—such as disputes over ownership, claims against the property, or unforeseen liens—title insurance will compensate the insured party for their financial losses. Additionally, it may cover legal fees associated with defending against such claims, which can be costly and burdensome. This protection is crucial for both buyers and lenders, as it adds an important layer of security in what is often one of the most significant investments a person will make. With this understanding, it’s clear that the other options do not accurately capture the primary benefit of title insurance. For example, while title insurance can reduce the need for a survey, it does not entirely replace it, especially in cases where property boundaries are a concern. Similarly, title insurance addresses issues that may arise regardless of when they are discovered, not just after closing, contradicting the notion that it is only applicable post-closing. Lastly, title insurance is not mandatory for every transaction; it is typically recommended, but its use can depend on the specifics of the transaction and the parties involved.