Regarding title insurance, when a claim is paid, which statement is normally true?

Regarding title insurance, when a claim is paid, which statement is normally true?

• A. Upon payment of a claim, the face amount of the title policy is normally reduced.
• B. Title companies are prohibited from charging fees for closings.
• C. The same charge for the premium for the lender's policy as for the owner's policy, although issued simultaneously, is billed.
• D. Both A & C

Answer: (A)

When a title insurance claim is paid, the insurer has fulfilled its indemnity for that portion of the loss, so the policy’s liability is reduced accordingly. In practice, this means the face amount of the title policy is normally decreased by the amount paid on the claim, leaving remaining coverage up to the reduced limit for any future covered issues. This approach keeps the indemnity aligned with what has already been paid. Closing costs are not prohibited; title companies do charge closing fees. The lender’s policy premium is not necessarily the same as the owner’s policy, even if issued at the same time, and premiums for the two policies are typically based on different factors and may be billed differently. Therefore, the only statement that accurately reflects common practice is that the face amount is reduced after a claim payment.

When a title insurance claim is paid, the insurer has fulfilled its indemnity for that portion of the loss, so the policy’s liability is reduced accordingly. In practice, this means the face amount of the title policy is normally decreased by the amount paid on the claim, leaving remaining coverage up to the reduced limit for any future covered issues. This approach keeps the indemnity aligned with what has already been paid.

Closing costs are not prohibited; title companies do charge closing fees. The lender’s policy premium is not necessarily the same as the owner’s policy, even if issued at the same time, and premiums for the two policies are typically based on different factors and may be billed differently. Therefore, the only statement that accurately reflects common practice is that the face amount is reduced after a claim payment.