What is the difference between marketable title and insurable title?

• A. Marketable title is free from significant defects; insurable title is title that can be insured by a title company despite minor defects
• B. Marketable title is only for commercial properties
• C. Insurable title cannot have defects
• D. Marketable title requires a mortgage

Answer: (B)

The difference is about what each term guarantees or protects in a sale. A marketable title is one a reasonable buyer would accept, meaning the ownership appears clear and free from significant defects or encumbrances that would threaten the buyer’s ability to own or resell the property. It passes a typical title search and would be acceptable in the market without raising major questions about ownership.

An insurable title is about the protection a title company is willing to provide through a title insurance policy. The policy can cover unknown defects that a buyer might not discover during due diligence, but the insurer may still note certain defects or exceptions. So a title can be insurable even if there are minor defects, provided those issues can be addressed or are covered by policy exceptions; the key is the risk the insurer is willing to assume.

It’s not restricted to commercial properties—marketable title applies to both residential and commercial real estate, and marketability depends on defects, not on property type.