What is a primary function of a title insurance policy?

A primary function of a title insurance policy is to protect against potential defects in the title. Title insurance serves as a safeguard for property buyers and lenders by ensuring that the title to a property is clear of any liens, encumbrances, or defects that could affect ownership rights. This coverage is crucial because it helps to identify existing issues or claims against the property that might not be apparent during a routine title search or could have occurred after the search was conducted.

Defects in title can include invalid claims from previous owners, unresolved liens for unpaid taxes or debts, or legal disputes regarding rightful ownership. By obtaining title insurance, policyholders gain financial protection against losses that might arise as a result of these defects. In the event that a title issue arises after closing, the title insurance policy will cover legal fees and any losses incurred, allowing the policyholder peace of mind when making a significant real estate investment.