Florida Broker Practice Exam

What does title insurance primarily protect against?

1. Property taxes

2. Title defects

3. Homeowner's associations

4. Survey disputes

The correct answer is: Title defects

Title insurance primarily protects against title defects. This type of insurance ensures that the property ownership is clear and free from any issues that could arise due to previous claims, liens, or encumbrances on the title. It safeguards the buyer and lender from potential losses resulting from disputes over property ownership, which can stem from various legal issues such as forgery, misinterpretation of wills, or errors in public records. When someone purchases a property, they want to ensure that they are getting full ownership without any hidden problems that could lead to financial loss. Title insurance performs a critical role by conducting a thorough title search prior to the sale and then providing coverage that addresses these uncovered defects. If a title issue arises later, the title insurance company will typically cover the costs associated with legal fees or the settlement of claims, offering significant peace of mind to the property owner. Property taxes, homeowner's associations, and survey disputes, while related to property ownership, do not fall under the primary protection offered by title insurance. Instead, property taxes are a responsibility of the property owner, homeowner's associations involve adherence to community rules and fees, and survey disputes typically relate to boundary issues between properties rather than defects in title.