A policy protecting a property buyer against financial loss from title defects existing before the policy date.
Why Owner's Title Insurance Policy matters on the exam
This term belongs to Transfer of Title. The questions below are real items from Freehold's bank that use it - each one cites its source.
Exam questions using Owner's Title Insurance Policy
Every Freehold question shows why the right answer is right — and cites its source.
An owner's title insurance policy primarily protects against:
Future zoning changes that reduce value
Physical damage to the structure
Defaults on the mortgage loan
Title defects that occurred before the policy date
Show answer & explanation
Title defects that occurred before the policy date — Title insurance is retrospective: it protects against losses from title defects existing before the policy's effective date, such as forged deeds, unknown heirs, or recording errors, discovered after closing.
Source: PSI National Real Estate Exam Content Outline §9 Transfer of Title
An owner's title insurance policy generally continues to protect:
The insured owner, and often their heirs, for as long as they retain an interest in the property
Only until the property is resold to a new owner, at which point the original policy lapses entirely
Only for a single year following the closing date on which the policy was originally issued
Only against title defects that first arise after the effective date printed on the policy itself
Show answer & explanation
The insured owner, and often their heirs, for as long as they retain an interest in the property — An owner's policy typically remains in force for as long as the insured owner, or their heirs receiving property without consideration, retain an interest, unlike a lender's policy which shrinks with the loan balance.
Source: PSI National Real Estate Exam Content Outline §9 Transfer of Title
Who customarily pays for the owner's title insurance policy in a given real estate transaction:
Is generally a matter of local custom and negotiation between buyer and seller
Is generally and uniformly fixed by a single federal law applied nationwide across the country
Is always split evenly under state statute
Must always be paid in full and entirely by the buyer's mortgage lender at closing
Show answer & explanation
Is generally a matter of local custom and negotiation between buyer and seller — There is no uniform national rule for who pays owner's title insurance premiums; local custom and the negotiated terms of the purchase contract determine whether the buyer or seller pays in a given area.
Source: PSI National Real Estate Exam Content Outline §9 Transfer of Title
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