What does title insurance protect against?

Title insurance is a vital aspect of real estate transactions, primarily designed to protect property owners and lenders from losses caused by defects in the title to the property. A defect may include issues such as outstanding liens, encumbrances, or claims that were not disclosed prior to the purchase of the property.

When a buyer acquires property, title insurance ensures that the title is clear—that is, free from any legal claims or disputes regarding ownership. If a defect arises after the transaction, the title insurance policy provides financial protection against losses incurred, including legal fees and costs associated with resolving the issue or any financial loss from the claim itself.

The other potential options might relate to various aspects of property ownership, but they do not fall under the scope of what title insurance specifically covers. For instance, undisclosed mortgages and property taxes represent different legal issues that may require separate insurance or assessments; similarly, property appraisals pertain to valuation and do not directly relate to the title's validity. Therefore, the focus of title insurance is firmly on safeguarding against defects in the title, making it crucial for anyone involved in real estate transactions.