Upon receiving an offer to purchase, the licensee should recommend to the buyers that:

• A. It insures against property damage
• B. It protects title defects and defects in the chain of ownership
• C. It guarantees a loan
• D. It covers homeowner's liability

Answer: (B)

When a buyer submits an offer, the licensee should emphasize protecting ownership rights through title insurance. A title policy protects the buyer against defects in the title and gaps in the chain of ownership that could surface after closing—such as undiscovered liens, forged documents, conflicting claims, or recording errors. Even with a thorough title search, hidden issues can emerge, and the policy provides defense costs and coverage up to the policy amount if a covered defect affects ownership. This kind of protection is centered on ensuring the buyer actually owns the property free of encumbrances that weren’t found or disclosed earlier.

This focus differs from property insurance for the structure, which covers physical damage to the home and its contents, not ownership problems. It also isn’t a loan guarantee; mortgage or lender protection relates to the loan itself, not the title to the property. And it doesn’t cover homeowner’s liability for injuries on the property—that would be addressed by separate liability insurance. The owner's title policy thus offers targeted protection for the buyer’s most important asset: clear, marketable title.