What is the primary purpose of 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!

The primary purpose of title insurance is to protect property buyers and lenders from defects in the title. This includes any issues that may arise from past ownership, liens, or other legal claims that could affect the rightful ownership of the property. Title insurance ensures that if any such claims arise after the purchase, the insurer will help resolve them or provide compensation for financial losses.

This comprehensive protection is essential because it safeguards the investment of the buyer and the interests of the lender. Buyers need assurance that they are receiving clear title to the property, while lenders require confidence that their security interest is protected. Title insurance operates on the principle of preventing losses before they occur, thereby instilling trust in real estate transactions.

The other options highlight important aspects of real estate and property ownership but do not fully capture the essence of what title insurance provides. Financing addresses the economic aspect of purchasing a property but is not the function of title insurance. The concept of insuring the physical property relates to homeowners' insurance, which protects against damage to the structure rather than legal ownership. Protecting property buyers from defects in ownership is a part of what title insurance does, but it does not encompass the lender's interests, making the more complete answer the protection of both parties against defects in the title.

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