ALTA Practice Exam – Complete Prep Resource

A title insurance claim primarily involves filing a claim for compensation due to loss from a defect covered under the policy. When a claim is made, the policyholder is asserting their right to coverage provided by the title insurance, typically in cases where there are issues with the title that were not identified before the property purchase. These defects could include liens, encumbrances, or ownership disputes — matters that could lead to financial loss for the titleholder.

This process is crucial because it allows policyholders to seek relief from potential financial setbacks that arise from unforeseen issues with the title after the transaction has been completed. The insurer then investigates the claim and determines whether it falls under the protections granted by the title policy, ultimately offering compensation if the claim is valid.

Understanding this nature of title insurance claims highlights the importance of the coverage it provides during real estate transactions, ensuring that buyers are not left vulnerable to past ownership issues.