What are some risks covered by title insurance?

Title insurance primarily protects lenders and property owners from losses due to defects in a property's title. The risks associated with title issues can be complex and often arise from factors that are not immediately apparent. One of the significant risks covered by title insurance is loss due to unknown liens or encumbrances.

When a property is sold, there may be existing liens or encumbrances on the title that are not disclosed during the transaction. These could include unpaid taxes, mortgages, judgments, or mechanic's liens, which can lead to financial loss if the title is not clear. Title insurance provides coverage against such unforeseen issues, ensuring that the insured party is protected from potential financial fallout resulting from these problems that could arise after the purchase of the property.

Therefore, having title insurance is a crucial safeguard for property owners and lenders, as it ensures peace of mind regarding the validity of the property's title and helps secure their investment.