What is 'title insurance' and why is it important in Delaware real estate transactions?
Why Insurance that protects the insured against financial loss from defects in title, liens, or encumbrances that existed before the policy date Is Correct
Answer B: Insurance that protects the insured against financial loss from defects in title, liens, or encumbrances that existed before the policy date
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
Any claim, lien, charge, or liability attached to real property that affects its value or limits its use.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
Title InsuranceInsurance 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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Key Terms to Know
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
EncumbranceAny claim, lien, charge, or liability attached to real property that affects its value or limits its use.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
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