PSI Virginia Real Estate Practice Exam

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Prepare for the PSI Virginia Real Estate Exam with comprehensive quizzes. Study using flashcards and multiple-choice questions, complete with hints and explanations. Ace your exam with confidence!

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Which option describes the purpose of title insurance?

To increase property value over time
To protect against claims prior to purchase
To guarantee a buyer's investment success
To ensure property taxes are paid

The correct answer is: To protect against claims prior to purchase

The purpose of title insurance is primarily to protect the buyer and lender against any claims or defects in the title that may arise after the purchase of the property. This coverage typically addresses issues related to ownership rights, such as liens, encumbrances, or any legal challenges that could jeopardize the buyer's ownership. Title insurance ensures that if a claim is made against the title based on issues that existed before the purchase, the insurance company will defend the title in a court of law and compensate for any losses incurred. This protection is important because it provides peace of mind to both buyers and lenders, allowing them to proceed with the transaction knowing that there is coverage in place for unknown issues that could affect their investment. This contrasts with options that suggest title insurance has goals related to increasing property value, guaranteeing investment success, or ensuring tax payments, which are not part of its fundamental purpose.