What is the purpose of title insurance in real estate transactions?

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Multiple Choice

What is the purpose of title insurance in real estate transactions?

Title insurance protects against hidden defects in the property's title that a standard title search might miss. A title search examines public records to confirm ownership and to flag obvious issues, but some problems aren’t discoverable during that search—things like forged signatures, undisclosed heirs, clerical errors, or fraud. The title policy provides financial protection and legal defense costs if a covered defect is later discovered and affects ownership, for either the buyer (owner’s policy) or the lender (lender’s policy). It does not insure against physical problems with the property, environmental hazards, or personal injuries, nor does it guarantee the sale price.

Title insurance protects against hidden defects in the property's title that a standard title search might miss. A title search examines public records to confirm ownership and to flag obvious issues, but some problems aren’t discoverable during that search—things like forged signatures, undisclosed heirs, clerical errors, or fraud. The title policy provides financial protection and legal defense costs if a covered defect is later discovered and affects ownership, for either the buyer (owner’s policy) or the lender (lender’s policy). It does not insure against physical problems with the property, environmental hazards, or personal injuries, nor does it guarantee the sale price.

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