PSI Virginia Real Estate Practice Exam

What distinguishes a marketable title from an insurable title?

1. Marketable title is always free from defects

2. Insurable title guarantees protection against future claims

3. Marketable title requires insurance

4. Insurable title is guaranteed to be clear of liens

The correct answer is: Insurable title guarantees protection against future claims

A marketable title is defined as one that is free from significant defects or issues that would affect its transferability and usability. It must be able to be sold or transferred without considerable risk of litigation. In contrast, an insurable title is one that an insurance company is willing to issue a title insurance policy on, which protects the buyer against future claims that may arise from defects in the title. The correct answer highlights that an insurable title comes with a guarantee of protection against future claims, which is crucial for buyers. When a title is insurable, it means that any issues that could arise regarding ownership, liens, or other encumbrances would be covered by the insurance policy. This provides buyers with a safety net, as they are protected from financial loss due to claims against the title. In comparison, the other options do not align with the definitions or principles surrounding marketable and insurable titles. Marketable title does not have to be entirely free from defects; it just needs to be free from defects that would impede its transfer. Insurable title does provide protection, but it does not guarantee that the title is clear of all liens; it merely covers potential issues that might emerge. Lastly, obtaining insurance for a marketable title is not a