What is "title insurance"?

Title insurance is specifically designed to protect property owners and lenders from financial loss due to defects in the title of real property. This can include issues such as liens, encumbrances, or other claims that may not have been discovered during the due diligence process before the purchase of the property. When a buyer obtains title insurance, they gain assurance that their investment is safeguarded against these potential legal issues that could arise after the purchase.

In contrast, other options relate to different types of insurance or warranties that do not address the nuances of real property titles. For example, coverage for physical damage to a home pertains to homeowners insurance, while insurance required for property leasing typically involves liability or rental insurance. A warranty guaranteeing property upgrades is not an insurance policy and instead might be an agreement related to renovation or improvements made to the property. Therefore, the definition provided in the correct answer precisely reflects the purpose and importance of title insurance in real estate transactions.