Escrow & Title
What is 'title insurance' and what does it protect against in Hawaii?
AA. Insurance against future market value decreases
BB. Insurance against losses from defects in title that existed before the policy's effective date but were unknown at closing✓ Correct
CC. Insurance covering the property against physical damage
DD. Insurance protecting the agent against errors and omissions
Explanation
Title insurance protects the insured (owner or lender) against losses from title defects, liens, encumbrances, or other title issues that existed before the policy date but were not discovered in the title search. Unlike other insurance, title insurance covers past (not future) events.
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Key Terms to Know
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.
EncumbranceAny 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.
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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