Which statement best describes the distinction between a commitment for title insurance and a policy of title insurance?

Which statement best describes the distinction between a commitment for title insurance and a policy of title insurance?

• A. The former is only a contract to issue a policy.
• B. The latter is an enforceable promise to issue a contract of indemnity.
• C. Liability of the issuing company under the latter is shorter.
• D. Both A & C

Answer: (A)

A commitment for title insurance is a contract to issue a policy in the future. It sets out what the insurer will issue, who will be covered, the proposed coverage amount, and any conditions or exceptions, but it does not provide insurance or indemnity itself until the policy is actually issued. The policy of title insurance, by contrast, is the actual contract of indemnity that, once issued, protects the insured against covered title defects, subject to the policy’s terms, conditions, exclusions, and endorsements. So the key distinction is that the commitment promises a policy to be issued under specified terms, whereas the policy is the real insurance contract that provides coverage. The other statements don’t fit because a policy is not merely a promise to issue, and the length of liability isn’t what defines the difference.

A commitment for title insurance is a contract to issue a policy in the future. It sets out what the insurer will issue, who will be covered, the proposed coverage amount, and any conditions or exceptions, but it does not provide insurance or indemnity itself until the policy is actually issued. The policy of title insurance, by contrast, is the actual contract of indemnity that, once issued, protects the insured against covered title defects, subject to the policy’s terms, conditions, exclusions, and endorsements. So the key distinction is that the commitment promises a policy to be issued under specified terms, whereas the policy is the real insurance contract that provides coverage. The other statements don’t fit because a policy is not merely a promise to issue, and the length of liability isn’t what defines the difference.