What is the purpose of title insurance?

• A. To protect the seller from financial loss
• B. To protect the lender and owner from title disputes
• C. To ensure all parties complete their agreements
• D. To guarantee the appraisal value of the property

Answer: (B)

The purpose of title insurance is primarily to protect the lender and owner from title disputes. When a property is bought, the title insurance policy is an essential part of the closing process, providing a safeguard against future claims or issues that may arise regarding the property's title. This includes unexpected problems such as undisclosed liens, fraud, or errors in public records that could affect ownership rights.

Title insurance helps ensure that the new owner can reclaim their property in the event of such disputes, which might arise after the purchase has been completed. Lenders also require title insurance to protect their financial interests in the property, as it assures them that they have a valid, enforceable lien against the property. This strong protective aspect helps to facilitate safer real estate transactions, giving both buyers and lenders peace of mind regarding their ownership rights and investment.