What is the main purpose of title insurance in a residential real estate transaction?
Correct Answer
D) To protect against financial loss due to title defects or ownership issues
Title insurance protects property owners and lenders against financial loss resulting from title defects, liens, encroachments, or other ownership issues that may not have been discovered during the title search. It provides coverage for legal costs and financial losses related to title problems.
Why This Is the Correct Answer
Option D correctly identifies title insurance's primary function as protecting against financial loss due to title defects or ownership issues. This aligns with Canadian insurance regulations and real estate practice standards. Title insurance policies specifically cover risks like undisclosed liens, survey errors, fraud, forgery, and other title-related problems that could result in financial loss or legal disputes. The coverage includes both the cost of legal defense and actual monetary damages, making it a comprehensive protection mechanism for property ownership rights.
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