Which statement best describes title insurance?

Which statement best describes title insurance?

• A. Title insurance protects against loss due to liens and encumbrances, defects in, or unmarketability of title
• B. Title insurance protects against property damage only
• C. Title insurance guarantees mortgage performance
• D. Title insurance is the same as homeowners insurance

Answer: (A)

Title insurance protects the owner and/or lender from losses caused by problems with the property's title that existed when the policy was issued. This includes liens and encumbrances, defects in the title, or conditions that would make the title unmarketable. If someone later challenges the title or a defect surfaces that affects ownership or the ability to transfer the property, the policy provides defense costs and compensates for covered losses up to the policy amount. It does not insure physical property damage, which is covered by homeowners or property insurance, and it does not guarantee that the mortgage will be repaid or that the borrower will perform on the loan. There is a separate lender’s title insurance policy that protects the lender’s interest in the title, but that still concerns title risk rather than loan performance.

Title insurance protects the owner and/or lender from losses caused by problems with the property's title that existed when the policy was issued. This includes liens and encumbrances, defects in the title, or conditions that would make the title unmarketable. If someone later challenges the title or a defect surfaces that affects ownership or the ability to transfer the property, the policy provides defense costs and compensates for covered losses up to the policy amount.

It does not insure physical property damage, which is covered by homeowners or property insurance, and it does not guarantee that the mortgage will be repaid or that the borrower will perform on the loan. There is a separate lender’s title insurance policy that protects the lender’s interest in the title, but that still concerns title risk rather than loan performance.