Humber/Ontario Real Estate Course 4 Exam Practice

Which statement about title insurance is correct?

1. Title insurance can replace a property survey.

2. Title insurance does not cover pre-existing issues.

3. Title insurance is not required for mortgage approval.

4. Title insurance protects against past and future title defects.

5. Title insurance replaces the need for a title search.

6. Title insurance will cover any issues found after insurance purchase.

The correct answer is: Title insurance protects against past and future title defects.

Title insurance is designed to protect property owners and lenders from potential losses due to defects in the title, both past and future. This means that if there are issues with the title that were not identified prior to the purchase of the insurance—such as errors in public records, issues stemming from forgery, or undisclosed heirs—title insurance provides coverage against these losses. The forward-looking protection aspect recognizes that while ownership may initially appear clear, the title could be challenged later due to issues that existed before the policy was issued. In contrast, title insurance cannot replace a property survey, as a survey provides crucial information about property boundaries, easements, and encroachments that title insurance does not cover. Additionally, it does not cover pre-existing issues because the policy typically protects against unknown or undisclosed problems arising from before the insurance was purchased. While it is common for lenders to require title insurance, it is not universally required for mortgage approval. Furthermore, title insurance does not take the place of a title search, which is often necessary to uncover issues that could affect ownership rights before the purchase. Finally, any issues that arise after the purchase of the title insurance are generally not covered unless they relate back to issues present before the policy's effective date.