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

The primary function of title insurance is to protect against financial loss from defects in title. Title insurance serves as a safeguard for property owners and lenders by providing coverage for losses that may arise due to issues such as unknown liens, encumbrances, or fraud affecting the property title. This protection is critical because it helps to ensure that the buyer has a clear and marketable title to the property, free from unexpected claims or legal challenges that could affect ownership rights.

While other options might seem related, they do not accurately reflect the main purpose of title insurance. For instance, covering property damage costs is typically the role of homeowners' insurance rather than title insurance. Similarly, while title insurance indirectly supports the realization of property value during sale by ensuring a clear title, it does not guarantee the property's market value itself. Lastly, while it helps address ownership disputes arising from title defects, title insurance is not a warranty but a policy designed to mitigate risks associated with title issues. Thus, the correct option clearly outlines the fundamental role of title insurance in protecting the financial interests of owners and lenders.