What is the purpose of title insurance?

The purpose of title insurance is to protect against defects or clouds on the title, which refers to issues that may affect the ownership rights of the property. These defects can include previous liens, claims, or encumbrances that were not discovered during the title search prior to the purchase. Title insurance ensures that the property is free from these potential ownership disputes, thus providing the buyer with security regarding their legal ownership of the property.

This type of insurance is crucial in real estate transactions because it can prevent substantial financial loss that might occur if a competing claim to the title arises after the purchase. Title insurance not only covers legal fees for resolving disputes but also protects the buyer from any claims that can arise from issues like forgery, fraud, or undisclosed heirs. Therefore, having title insurance is a wise safeguard for anyone purchasing real estate, ensuring their title remains clear.