What is the function of title insurance?

Title insurance plays a crucial role in real estate transactions by protecting against losses from defects in the title. When a buyer purchases property, they receive a title that is supposed to be free of defects, claims, or encumbrances. However, there can be hidden issues, such as unpaid taxes, liens, or irregularities in the title’s chain of ownership, which may not be discovered through a title search.

The protection offered by title insurance ensures that the buyer is safeguarded financially from these potential defects. If a title issue arises after the purchase, the title insurance company will typically cover the costs related to defending against claims or compensating for losses associated with the title defect.

While legal defense is important, it is not the primary function of title insurance, which focuses more on coverage for financial losses due to title issues. Securing a loan and ensuring property taxes are paid are distinct functions that are not encompassed by title insurance.