Florida Broker Practice Exam

Which statement is true regarding the claim payment of an owner's title insurance policy?

1. It extends beyond the purchase price

2. It only covers legal fees

3. It pays up to the purchase price

4. It is capped at the appraisal value

The correct answer is: It pays up to the purchase price

The correct answer asserts that an owner's title insurance policy pays up to the purchase price of the property. This is significant because title insurance provides protection to the property owner against losses that may arise from defects in the title, such as liens, encumbrances, or claims from previous owners. When a claim is made, the insurance company typically compensates the policyholder up to the amount they paid for the property, which is the purchase price. This ensures that the owner can recover financially in the event of a title-related issue, up to the initial investment made in the property. In this context, it is essential to understand the role and limitations of title insurance, as it is designed to safeguard the owner's financial interest in the property against past title problems. Other statements do not accurately represent how owner’s title insurance functions or its limitations, which further clarifies why this answer is the most appropriate choice.