What is the "exclusion and exception" clause in title insurance policies?

The "exclusion and exception" clause in title insurance policies is designed specifically to list certain risks, defects, or conditions that are not covered by the insurance. This clause is crucial because it delineates the boundaries of the insurer's liability, clearly informing the policyholder about potential issues that could arise relating to the property's title that would not be protected under the policy. For instance, common exclusions might include existing liens that were not discovered during the title search or disputes over easements.

Understanding this clause is vital for anyone involved in real estate transactions, as it informs the parties of the limitations of their coverage and helps them assess risks when purchasing property. The other options may describe related concepts in a title insurance policy but do not accurately capture the essence of what the exclusion and exception clause entails.