An indemnity requested by a title insurance company from either a borrower or a seller to minimize its risk during the time between closing a real estate transaction and the actual recording of the instrument.

A title insurance company usually obtains a gap indemnity when there is a sit down closing because there is a gap of time between closing the real estate transaction and recording the instruments.

In a sit down closing, the title insurer assumes the risk that nothing will be recorded that could cause the title insurance policy holder a loss. The effective date of the marked-up title commitment or policy is the date the documents are recorded. By funding before recording the transactional instruments, the potential exists for unexpected matters to appear of record before the documents are recorded.

The title insurance company minimizes the risk posed by the gap by doing one or more of the following: