What does the term "title insurance" refer to?

The term "title insurance" specifically refers to a policy that protects against financial loss due to defects in a title to real property. This protection primarily addresses issues that may arise from disputes over ownership rights, such as liens, encumbrances, or fraud that could affect one's legal claim to the property. Title insurance is crucial in real estate transactions as it ensures that the buyer has clear and undisputed ownership of the property, providing peace of mind regarding the validity of the property title.

In contrast, other options focus on different areas of protection. For example, protecting against property tax liabilities is typically managed through tax payment strategies rather than title insurance. The idea of covering mortgage payments in case of job loss relates to unemployment insurance or mortgage protection insurance, which specifically addresses the borrower's ability to make payments but does not affect the title of the property itself. Lastly, coverage for damages due to natural disasters is relevant to homeowners' insurance or hazard insurance policies and does not pertain to issues of title or ownership.