What type of financial protection does title insurance provide?

Title insurance primarily provides protection against title defects and ownership disputes. This form of insurance safeguards the buyer and lender from potential claims that may arise regarding the ownership of the property. Title defects can include issues such as liens, encroachments, or claims by other parties asserting ownership rights. By securing title insurance, the insured party is protected against financial loss due to these unforeseen issues that might affect their claim to the property.

Understanding title insurance is crucial for anyone involved in property transactions as it ensures that the title to a property is clear and unencumbered, allowing for a smoother transfer of ownership and peace of mind for the new owner and the lender. It does not cover property damage, natural disasters, or tax increases, as those areas fall under different types of insurance.