What is a "title insurance policy" designed to protect against?

A title insurance policy is specifically designed to protect against losses due to defects in the title. This includes issues such as undisclosed liens, claims of ownership by others, or problems arising from prior transfers of the property that could affect ownership rights. When a title insurance policy is issued, it confirms that the insurance company has conducted a thorough due diligence process to uncover any potential problems with the title. If any issues that were not identified during the title search arise in the future, the insurance will cover the financial loss or legal fees associated with resolving those issues. This protection is essential for property buyers and lenders, as it provides peace of mind regarding the legal status of the property they are acquiring.

In contrast, market fluctuations in property value, damages caused by natural disasters, and other forms of loss are typically covered by different types of insurance policies, such as homeowners insurance or property casualty insurance, but not by title insurance.