What is the purpose of a title insurance policy?

The purpose of a title insurance policy is to protect against defects or issues related to property titles. When a property is bought or refinanced, a thorough examination of the title is conducted to identify any potential problems, such as liens, encumbrances, or disputes over ownership. Despite this examination, there may still be undiscovered issues that could arise after the purchase, such as claims from previous owners or errors in public records. Title insurance safeguards the policyholder by providing financial protection against these unforeseen defects, covering legal fees and costs associated with rectifying any title issues that may come to light after the property transaction. This protection is critical for buyers and lenders, ensuring their financial investment in the property is secure.

The other options—providing a loan, offering financial assistance in repairs, or ensuring compliance with zoning laws—do not align with the fundamental function of title insurance, which is solely focused on title protection.