What is title insurance and why is it purchased?

What is title insurance and why is it purchased?

• A. Insurance Against Property Damage
• B. Insurance Against Flood Risk
• C. Insurance That Covers Homeowner Liability
• D. Insurance Protecting Buyer or Lender Against Title Defects Not Found in Public Records

Answer: (D)

Title insurance protects the buyer or lender from financial loss due to problems with the property's title that aren’t found in public records. You want clear ownership so you can transfer the deed without lawsuits or claims against the property. Some title issues slip through even careful searches—things like forgery, undisclosed heirs, mistakes in the public-records, or unknown liens. The policy provides coverage at closing to defend against those claims and, if needed, to compensate for any loss up to the policy amount. It’s typically purchased at closing and can include an owner's policy for the buyer and a lender's policy for the loan. This is distinct from property insurance (which covers physical damage to the home), flood insurance, or liability coverage, which protect against different risks.

Title insurance protects the buyer or lender from financial loss due to problems with the property's title that aren’t found in public records. You want clear ownership so you can transfer the deed without lawsuits or claims against the property. Some title issues slip through even careful searches—things like forgery, undisclosed heirs, mistakes in the public-records, or unknown liens. The policy provides coverage at closing to defend against those claims and, if needed, to compensate for any loss up to the policy amount. It’s typically purchased at closing and can include an owner's policy for the buyer and a lender's policy for the loan. This is distinct from property insurance (which covers physical damage to the home), flood insurance, or liability coverage, which protect against different risks.