What does a title insurance policy protect against?

A title insurance policy primarily protects against title defects that were not discovered during a title search. This includes issues such as outstanding liens, claims against the property, or other legal encumbrances that could affect ownership rights. These defects could arise from various sources, such as errors in public records, undisclosed heirs, or even fraud related to the title. When purchasing property, a title insurance policy serves as a safeguard, ensuring that the buyer is protected against financial loss resulting from these unforeseen issues that may surface after the purchase.

On the other hand, options like unforeseen natural disasters, future liens, and market value fluctuations do not fall under the protection of a title insurance policy. Natural disasters could be covered by other types of insurance, such as homeowner’s insurance. Future liens would not be covered because title insurance protects only against issues that predated the sale of the property. Similarly, fluctuations in market value are standard economic occurrences and are not addressed by title insurance. The primary focus of title insurance is to ensure that the title to the property is clear and free from undisclosed defects at the time of purchase, thus making the correct answer about title defects particularly relevant in real estate transactions.