What does title insurance protect against?

Title insurance is designed to provide protection against financial loss that may arise from defects in a property’s title. This can include issues such as undisclosed liens, ownership disputes, clerical errors in public records, or any other encumbrances that may affect ownership rights. When a buyer purchases title insurance, they are essentially securing their investment by ensuring that any problems affecting the title that existed prior to their ownership will be covered.

The concept of title insurance is crucial because it safeguards the buyer and lender from legal issues that could potentially result in monetary losses. If a claim were to arise due to a defect in the title, the title insurance would cover legal fees and any losses incurred due to the defect, thus offering significant peace of mind to property owners.

In contrast, other options do not align with the purpose of title insurance. Future claims from potential buyers, for instance, would not be covered, as title insurance is concerned with the current integrity of ownership rather than potential future claims. Similarly, the risks of property damage during renovations or increases in property tax assessments pertain to different areas of real estate management and are not a focus of title insurance. This delineates the specific protective role title insurance plays in real estate transactions.