What type of insurance protects property owners from financial loss due to title defects?

The correct answer is title insurance, which specifically protects property owners from financial loss arising from defects in the title of the property. Title defects can include issues such as liens, undisclosed heirs, clerical errors, or any disputes over ownership rights that may not have been discovered during the title search before the property purchase.

By purchasing title insurance, property owners ensure that they are financially protected against claims or legal issues arising from these defects. If a title defect arises after a property purchase, the title insurance company will either resolve the issue or compensate the owner for any loss suffered due to the defect, thus safeguarding their investment in the property.

Other types of insurance, like liability insurance, homeowners insurance, and flood insurance, serve different purposes. Liability insurance typically covers injuries or damages to others that occur on the property, while homeowners insurance protects against loss or damage to the physical structure and personal belongings inside a home due to specified risks, such as theft or fire. Flood insurance specifically addresses damage caused by flooding, which is not related to title issues. Each of these insurances plays an important role in property protection but does not provide the specific coverage needed for title defects.