What is the primary purpose of title insurance in a residential real estate transaction?
Correct Answer
D) To protect against title defects and certain losses
Title insurance protects property owners and lenders against losses arising from title defects, liens, encroachments, and other title-related issues that may not be discovered during the title search. It provides coverage for past events that could affect ownership rights.
Why This Is the Correct Answer
Option D correctly identifies the primary purpose of title insurance as protecting against title defects and certain losses. Title insurance policies in Canada specifically cover financial losses arising from title defects, liens, encroachments, survey errors, fraud, and other title-related issues that existed before the policy date but were unknown at the time of purchase. This protection extends to both the property owner and mortgage lender, providing coverage for legal costs and financial losses up to the policy amount. The insurance is designed to address the inherent limitations of title searches and provide security in property ownership.
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