What does title insurance insure against?

Title insurance primarily insures against future loss arising from prior risks associated with the title of the property. This means that it protects the policyholder from potential claims or defects in title that may surface after the purchase, which were not discovered during the title search process before the transaction was completed. These risks can include issues like undisclosed heirs, fraud, mistakes in public records, and other encumbrances that could affect ownership.

While current ownership disputes, existing liens, and property damage are important considerations in real estate transactions, they do not represent the primary focus of title insurance. Current ownership disputes might be addressed through litigation rather than insurance. Existing liens can be managed and resolved prior to closing, eliminating the risk before title insurance is needed. Property damage, although significant in its own right, is usually covered under homeowner’s insurance rather than title insurance, which specifically deals with the legal aspects of property ownership. Thus, the correct understanding of title insurance revolves around its protection against future losses stemming from issues that existed in the past but were not identified.