When does title insurance typically take effect for a residential property purchase?
Correct Answer
B) On the closing date when title transfers
Title insurance coverage begins on the closing date when legal ownership transfers to the buyer. The policy protects against title defects, survey issues, and certain legal problems that may not have been discovered during the title search process.
Why This Is the Correct Answer
Title insurance takes effect on the closing date when legal title actually transfers from the seller to the buyer. This timing is crucial because the insurance protects the new owner against title defects, liens, encumbrances, or other issues that may exist but weren't discovered during the title search. The policy cannot protect ownership rights before the buyer actually owns the property, making the closing date the logical and necessary commencement point for coverage.
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