What does title insurance protect against in real estate transactions?

Title insurance primarily protects against financial loss due to defects in the title of a property. This type of insurance provides coverage for issues that may not be discovered during the title search process prior to closing a real estate transaction. Such defects can include things like outstanding liens, fraud, undisclosed heirs, or errors in public records that could challenge an owner’s legal right to the property.

The purpose of title insurance is to provide peace of mind to the homeowner or lender by ensuring that should these title defects arise after the purchase, they would be covered financially. This is critical in real estate transactions where the integrity of the title is fundamental to property ownership.

While environmental hazards, legal disputes over property boundaries, and construction defects are important considerations in real estate, they fall outside the scope of title insurance. Environmental hazards may require separate assessments or insurance types, legal boundary disputes could involve legal action or surveys, and construction defects are typically addressed through builder warranties or home insurance. Hence, the focus of title insurance is distinctly on the protection against financial loss due to title defects.