What is the primary purpose of title insurance in Canadian residential real estate transactions?
Correct Answer
C) To protect against title defects and certain risks outside the land title system
Title insurance protects property owners and lenders against financial loss due to title defects, survey issues, fraud, and other risks that may not be apparent in the public records. It provides coverage for issues that the land title system may not protect against.
Why This Is the Correct Answer
Option C correctly identifies title insurance's primary purpose as protecting against title defects and risks not covered by the land title system. In Canada's Torrens system, while the government guarantees clear title, certain exceptions exist including fraud, forgery, survey errors, and municipal work orders. Title insurance specifically covers these gaps, providing financial protection against losses from hidden title defects, survey issues, encroachments, and other risks that standard title searches may not reveal. This protection is essential for maintaining confidence in real estate transactions.
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