What role does title insurance play in real estate transactions?

Title insurance plays a crucial role in real estate transactions by protecting both buyers and lenders from disputes over property ownership. When a buyer purchases a property, a title search is typically conducted to uncover any issues related to the title, such as liens, encumbrances, or ownership disputes. However, even with a thorough search, it is possible for unknown problems to arise after the sale is completed.

Title insurance serves as a safeguard by offering financial protection in case any issues with the title are discovered later. If a claim on the property title arises, the title insurance policy will cover legal fees and any potential loss of property value, thereby ensuring that the buyer's or lender's investment is secure. This protection brings peace of mind to all parties involved in the transaction, knowing that they are financially protected against potential ownership disputes.

The other response options do not accurately depict the function of title insurance. For instance, title insurance does not speed up the buying process or guarantee the quality of the property, nor does it provide financing for purchasing the property. Instead, its key feature is in safeguarding ownership rights, making it an essential component of the real estate transaction process.