Escrow & TitleIntermediateAlabama Exam

Title insurance protects the policyholder against:

AFuture damage to the property, according to common practice
BDefects in title that existed before the policy was issuedCorrect
CFuture zoning changes
DEnvironmental contamination

Why Defects in title that existed before the policy was issued Is Correct

Answer B: Defects in title that existed before the policy was issued

Title insurance protects the insured against losses arising from defects in title that existed before the policy was issued, such as forged deeds, undisclosed liens, or errors in public records.

Exam Tip: Escrow & Title

Escrow questions test the neutral third-party role and the sequence of closing events. Remember that the escrow agent acts as a dual agent for both buyer and seller and cannot advocate for either side.

Key Escrow & Title Terms in This Question

Deed

A written legal instrument used to transfer ownership of real property from one party (grantor) to another (grantee).

Lien

A financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.

Title Insurance

Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.

Zoning

Local government regulations that control land use by dividing areas into zones specifying permitted uses, building sizes, and densities.

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