What does a title insurance policy reimburse a property owner for?

A title insurance policy primarily serves to protect property owners from financial losses due to certain title defects and encumbrances that are specified in the policy. Such defects can include issues like outstanding liens, unknown ownership claims, or inaccurate property boundaries that could affect the owner's right to title. By reimbursing the owner for losses related to these specific issues, the policy helps to ensure that the investment made in the property is secure.

The title insurance policy does not cover improvements made to the property, as those are not related to title issues. Similarly, default on mortgage payments pertains to the owner’s financial obligations and is unrelated to the title and ownership of the property. Costs related to property taxes are typically the responsibility of the owner and are not something covered by title insurance. Thus, the focus on reimbursing losses caused by specified title defects aligns perfectly with the purpose of title insurance.