What does ‘title insurance’ protect against?

Title insurance is specifically designed to protect property owners and lenders from financial losses related to defects in the title to real property. This includes issues such as open liens, which are claims against the property that have not been satisfied, or incorrect ownership claims, which can arise from mistakes in public records, fraud, or undisclosed heirs.

If a buyer purchases a property and later discovers that someone else has a legal claim to the title or that there are outstanding liens against it, title insurance provides coverage for the legal fees and financial losses that could result from resolving these disputes. By protecting against these risks, title insurance offers peace of mind to property buyers and lenders, ensuring that their investment is secure against potential title-related claims.

In contrast, the other options refer to different kinds of risks that are not covered by title insurance. Market fluctuations, physical damage to the property, and disputes with tenants relate to outside factors affecting property value, property condition, and landlord-tenant relationships, which are generally beyond the scope of what title insurance protects against.