Escrow & Title
A buyer purchases a property and later discovers an undisclosed easement that the title insurance policy did not cover. Which type of title insurance issue is this?
AA standard covered risk
BAn exception from coverage✓ Correct
CA general warranty claim
DA chain of title defect
Explanation
Title insurance policies contain exceptions — specific matters that are excluded from coverage. Easements known before closing that are not disclosed or noted in the policy may be exceptions from coverage, meaning the insurer has no obligation to defend or compensate.
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Key Terms to Know
Easement
A non-possessory right to use another person's land for a specific purpose.
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.
Chain of TitleThe sequential record of all transfers of ownership for a piece of property from the original patent holder to the present owner.
LienA financial claim against a property that serves as security for a debt or obligation, giving the creditor the right to foreclose if unpaid.
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