What is the primary purpose of a title insurance policy?

The primary purpose of a title insurance policy is to protect against potential losses due to defects in a property’s title. Title insurance serves as a safeguard for property buyers and lenders, ensuring that they are financially protected if any issues arise regarding the legal ownership of the property after the purchase.

These issues can include claims from other parties who assert ownership rights, undisclosed liens, or other defects that may not have been identified during the title search process. In essence, title insurance provides peace of mind by covering legal fees, court costs, and losses incurred from title defects, helping to ensure that the buyer's investment remains secure.

Other options do not correctly represent the purpose of title insurance. For instance, while guaranteeing ownership without any restrictions may seem appealing, the policy does not actually insure against all possible title issues; it only protects against those that were unknown at the time of purchase. Covering repair costs is unrelated to title insurance, as that falls under homeowners' insurance or other types of property coverage. Similarly, providing a discount on property taxes is not something that title insurance addresses, as property taxes are typically governed by local tax regulations and not influenced by a title policy.