### What is the primary purpose of title insurance? - [x] To protect against financial damages from disputes over property ownership - [ ] To repair damage to the property - [ ] To cover the cost of homeowners insurance - [ ] To insure the owner's personal belongings > **Explanation:** Title insurance is designed to protect homebuyers and lenders from financial losses due to disputes over the ownership of a property. This includes issues such as liens, encumbrances, or other claims against the property's title. ### Who requires title insurance in most mortgage agreements? - [x] Both the homeowner and the lender - [ ] Only the homeowner - [ ] Only the lender - [ ] The real estate agent > **Explanation:** Both the homeowner and the lender are typically required to have title insurance in mortgage agreements to protect against potential ownership disputes and ensure a clear title. ### What does title insurance typically protect against? - [x] Liens and encumbrances on the property - [ ] Fire and flood damage - [ ] Personal injury claims on the property - [ ] Loss of personal property > **Explanation:** Title insurance protects against financial losses arising from liens, encumbrances, and other title-related issues, ensuring that both the buyer and the lender have a clear title to the property. ### Which document grants ownership to a particular person? - [ ] The mortgage document - [ ] The inspection report - [x] The title - [ ] The deed of trust > **Explanation:** The title is the legal document that grants ownership to a specific person, distinguishing it from other documents associated with the property transaction. ### What might cause a lien on a property's title that a new homeowner would be responsible for if unknown? - [ ] Previous owner's insurance policy - [x] Unpaid construction work - [ ] Mortgage lender fees - [ ] Property survey costs > **Explanation:** Liens on a property title can arise from unpaid debts, such as construction work completed by a company that was never paid. The new homeowner would be responsible for settling unpaid debts if not protected by title insurance. ### When buying a home, why is a clear and valid title necessary? - [ ] To ensure efficient tax filings - [ ] To lower homeowners insurance costs - [x] To ensure there are no existing claims against property ownership - [ ] To streamline furniture move-in > **Explanation:** Having a clear and valid title ensures there are no disputes, liens, or encumbrances against the property's ownership, safeguarding the buyer’s purchase and the lender’s investment. ### What would title insurance typically cover in case of a previously unknown lien? - [ ] Refinance costs - [ ] Legal fees for personal lawsuits - [x] Payment to the lienholder - [ ] Property improvement costs > **Explanation:** If a previously unknown lien emerges after the property has been purchased, title insurance would cover the financial liability by paying the lienholder, thus ensuring a clear title. ### Who benefits from a title insurance policy in a real estate transaction? - [ ] Only the seller - [x] Both the buyer and the lender - [ ] Only the mortgage broker - [ ] Only the real estate agent > **Explanation:** Both the buyer and the lender benefit from a title insurance policy as it protects against losses from any disputes over title ownership once the property is purchased. ### What might happen if a home is bought without title insurance and a lien is later discovered? - [ ] The previous owner has to pay the debt - [x] The new homeowner is responsible for the debt - [ ] The realtor handles the payment - [ ] The lender adjusts the mortgage > **Explanation:** Without title insurance, the new homeowner would be directly responsible for any discovered liens, potentially resulting in significant financial liabilities. ### Besides protection against liens, what else can title insurance cover? - [ ] Fire and water damage recovery - [x] Hidden title defects and encumbrances - [ ] Pest infestation treatments - [ ] Security system installation > **Explanation:** Title insurance can cover damages arising from hidden title defects, encumbrances, and other claims or matters that affect property ownership, providing financial protection and peace of mind for the insured.