What is meant by "title insurance"?

Title insurance is an essential aspect of real estate transactions that provides protection against potential losses arising from defects or issues related to the title of the property. This type of insurance covers the policyholder, typically the buyer, against any claims or legal issues that may arise due to past ownership disputes, liens, or other title defects that could affect their ownership rights.

When a property is purchased, it is crucial for the buyer to ensure that the title is clear and free of any encumbrances. Title insurance performs a vital role by thoroughly examining the property's title history and providing coverage in the event that unforeseen issues come to light after the purchase has been completed. This distinguishes title insurance from other forms of insurance as it protects against specific risks related to ownership rather than coverage for physical damages to the property itself.

In contrast, other options suggest limitations or categories of coverage that do not accurately describe the full scope and purpose of title insurance. For example, the notion that title insurance protects only lenders misconstrues its fundamental purpose, while the suggestion that it covers physical property damage or is required for all buyers misrepresents its function and necessity based on individual situations and property conditions.