What does “underwriting” mean in terms of title insurance?

In the context of title insurance, "underwriting" refers specifically to the process of evaluating the risks associated with issuing a title insurance policy. This involves a thorough examination of the property's title history to identify any potential issues or defects that could affect ownership or the value of the property. The underwriter assesses various factors, such as liens, claims, and other encumbrances that may impact the title, thereby determining whether the title insurance can be issued and under what terms.

This is a critical step because it helps protect the insurer and the insured from unforeseen circumstances that may arise after the policy is issued. If risks are identified during the underwriting process, the underwriter can take appropriate steps to mitigate these risks, which might include offering specific exclusions in the policy or requiring additional documentation. Therefore, understanding underwriting is crucial for anyone involved in the title insurance industry as it lays the foundation for sound risk management practices.