Texas Surveyors Practice Exam

Which of the following is included in title insurance coverage?

1. Physical damage to the property

2. Errors in previous ownership documents

3. Environmental hazards on the property

4. Building codes and restrictions

The correct answer is: Errors in previous ownership documents

Title insurance is specifically designed to protect property owners and lenders from financial loss due to defects in a title, which includes issues arising from prior ownership. This can encompass errors in previous ownership documents, such as mistakes in the deed or legal descriptions, unnoticed claims, undisclosed heirs, or errors in recording. These matters can compromise an owner's right to the property and could lead to possibly expensive legal challenges. Title insurance covers such contingencies, ensuring that the policyholder is protected should any of these issues arise after the purchase. In contrast, physical damage to the property, environmental hazards, and building codes or restrictions do not fall under the standard scope of title insurance. Instead, these issues are typically addressed by other forms of insurance or regulations, such as homeowner's insurance for physical damage, environmental site assessments for hazards, and local governmental regulations for building codes. Thus, understanding the specific coverage of title insurance helps clarify its unique role in real estate transactions.