Why might a title insurance policy have exclusions?

A title insurance policy includes exclusions primarily because certain risks are difficult to predict or assess at the time the policy is issued. These exclusions delineate what is not covered by the policy, which allows insurers to manage their risk effectively. By identifying and excluding specific risks that may not be easily quantifiable or are beyond the control of the insurer, the policy can provide coverage for issues where a thorough title search may not fully reveal potential problems.

For instance, risks associated with zoning laws, environmental hazards, or certain undisclosed claims might be too volatile or subjective to insure against comprehensively. Consequently, these exclusions protect the insurer from unforeseen liabilities while still offering coverage for defined, insurable risks.

The other options, while they may touch on aspects related to risk and policy structure, do not directly address the primary reason for having exclusions. Reducing costs or ensuring validity does not capture the essence of why certain risks are specifically excluded, and limiting coverage to only common claims doesn't encompass the broader context of unpredictable risks that necessitate exclusions in the first place.