In the event of a title defect, which party is generally protected by title insurance?

Prepare for the Maryland Title Insurance Test with targeted multiple-choice questions, including hints and explanations for each to help you succeed. Get ready to ace your exam!

Title insurance is designed to protect against losses due to defects in the title of a property. The primary parties that benefit from title insurance are the property buyer and the lender. When a buyer purchases a property, they typically acquire title insurance to safeguard their investment from potential issues that may arise, such as undisclosed liens, errors in public records, or claims from previous owners.

The lender also often requires title insurance as part of the mortgage process to protect their financial interest in the property. If a significant title defect is discovered after the purchase, the title insurance policy would cover the legal fees and any losses incurred by the buyer or the lender because of the defect.

This dual protection ensures that both the buyer, who is making the investment, and the lender, who is providing financing, are safeguarded from any title-related claims that could jeopardize their interests in the property. Other parties, such as the seller or the real estate agent, do not have the same level of protection from title defects through title insurance.

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