What is "gap coverage" in the context of title insurance?

Gap coverage in title insurance refers to protection against title defects that may arise between the time a property is under contract and the time the transaction officially closes. This period, known as the "gap," can present risks because there may be actions taken by the seller or other parties during this time that could affect the title, such as additional liens or claims.

This coverage is particularly important in real estate transactions since it ensures that the buyer is safeguarded against any unforeseen issues that could emerge between these critical points in time. For instance, if a lien is placed on the property by a contractor or an issue of ownership arises from another claim, having gap coverage means the title insurance will cover these potential title defects, protecting the buyer's investment.

The other choices do not accurately capture the essence of gap coverage. For example, the notion of insurance for physical damage to property during the selling process or coverage against an owner's negligence in maintaining the property relates more to property insurance than to title insurance. Similarly, disputes with neighbors over property lines typically involve boundary issues or potential litigation rather than the coverage provided by title insurance. Thus, option B distinctly encapsulates the specific function of gap coverage in title insurance.