Escrow & TitleIntermediateCalifornia Exam

What is title insurance and what does it protect against?

AInsurance protecting the property against fire and casualty loss, under standard California escrow and title practice
BInsurance protecting the insured against losses from title defects, liens, encumbrances, or other matters that occurred before the policy dateCorrect
CInsurance protecting the agent against commission disputes, as typically handled by an escrow officer
DInsurance protecting the lender against the borrower's default, consistent with standard title insurance practice

Why Insurance protecting the insured against losses from title defects, liens, encumbrances, or other matters that occurred before the policy date Is Correct

Answer B: Insurance protecting the insured against losses from title defects, liens, encumbrances, or other matters that occurred before the policy date

Title insurance protects policyholders against financial loss from defects in the title that existed before the policy was issued — such as forged deeds, undisclosed heirs, errors in public records, or unknown liens. Unlike other insurance, it is a one-time premium paid at closing.

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).

Encumbrance

Any claim, lien, charge, or liability attached to real property that affects its value or limits its use.

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.

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