CHCP Insurance & Liability Considerations 2

Question 1

A buyer's lender requires a specific dollar amount of hazard insurance coverage. What minimum coverage amount is typically required?

Accepted Answer

At least 100% of the replacement cost of improvements

Answer

Lenders typically require hazard insurance equal to at least 100% of the replacement cost of the improvements to protect their collateral.

Question 2

Which type of title insurance policy is designed specifically to protect the lender's interest in the property?

Accepted Answer

Loan policy (mortgagee's policy)

Answer

A loan policy, also called a mortgagee's policy, protects the lender up to the loan amount and is required by most lenders.

Question 3

What is the primary purpose of errors and omissions (E&O) insurance for closing professionals?

Accepted Answer

To protect against professional mistakes that cause financial harm to clients

Answer

E&O insurance protects closing professionals against claims arising from negligent acts, errors, or omissions committed during professional services.

Question 4

A homeowner discovers a neighbor's fence encroaches 2 feet onto their property after closing. Which type of insurance would most likely cover this title defect?

Accepted Answer

Owner's title insurance

Answer

An owner's title insurance policy covers encroachments and boundary disputes that existed prior to the policy date.

Question 5

What does 'subrogation' mean in the context of title insurance?

Accepted Answer

The insurer's right to pursue a third party that caused the insured's loss

Answer

Subrogation allows the title insurer, after paying a claim, to step into the insured's shoes and seek recovery from the responsible party.

(CHCP) Certified Home Closing Professional Practice Test

(CHCP) Certified Home Closing Professional Practice Test

CHCP Insurance & Liability Considerations 2