What happens if a title defect is discovered after the policy issuance?

Prepare for the Maryland Title Insurance Test with targeted multiple-choice questions, including hints and explanations for each to help you succeed. Get ready to ace your exam!

When a title defect is discovered after the issuance of a title insurance policy, the title insurance company typically provides coverage by defending against claims related to the defect. This means that the insurance company will actively work to protect the policyholder from any legal claims or financial losses that arise due to the previously undiscovered defect in the title. Title insurance is designed to offer protection against past events that could affect ownership rights, and this includes covering the costs of litigation and settlement related to the defect.

This coverage can include not only the defense of claims but also the financial obligation to correct the title defect or compensate the property owner for any losses incurred due to the issue. The whole premise of title insurance is to ensure that the property owner can rely on having a clear title, which includes being backed by the insurance coverage when unexpected issues arise.

In contrast, having the policy become void or placing liability solely on the property owner would undermine the very purpose of title insurance, which exists to protect against unknown issues that predate the issuance of the policy. Additionally, the requirement to resolve the defect before selling the property could be impractical—often the purpose of title insurance is to enable ownership transfer even when issues are present, with the insurance providing an avenue for resolution.

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