American Land Title Association (ALTA) Practice Exam 2025 - Free ALTA Practice Questions and Study Guide

The primary purpose of a title insurance policy is to protect against financial loss due to defects in a property title. This means that if any issues arise regarding the title after the policy is issued—such as claims of ownership disputes, liens, or other defects not disclosed during the title search—the title insurance will cover the financial losses resulting from those issues.

The protection extends to costs associated with resolving such disputes, including legal fees, which can often arise if someone challenges the ownership of the property. Title insurance thus provides a critical safety net for property buyers and lenders, ensuring that they are safeguarded against past events or errors in the title that may not have been apparent at the time of the purchase.

While options related to mortgage obligations and ownership verification are important aspects of real estate transactions, they do not encompass the full protective scope that title insurance offers. Similarly, providing a warranty for repairs pertains to property condition rather than title security, which is not a focus of title insurance.