New Jersey Real Estate Exam Practice Question
Title insurance guarantees that
Correct Answer: C
Rationale: Title insurance primarily protects buyers and lenders from financial losses due to issues that may arise from unrecorded encumbrances, such as undisclosed liens or claims against the property.
Option A is incorrect because title insurance does not guarantee that there are no encumbrances; rather, it provides coverage against losses from unknown issues.
Option B misrepresents the role of title insurance, as it does not involve holding the property title by the lender; that pertains to mortgage agreements.
Option D is misleading since title insurance specifically addresses unrecorded encumbrances, while recorded liens are typically disclosed during the title search process.
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