What type of risks does title insurance cover?

Title insurance primarily protects against financial loss resulting from defects in the title to a property. When purchasing a property, there may be unknown issues that could affect ownership rights, such as unpaid liens, forgery, errors in public records, or undiscovered heirs. These issues could result in legal disputes or claims that may adversely impact the owner's rights to the property.

By obtaining title insurance, the owner gains coverage for these risks, ensuring that they are financially protected in the event that a defect in the title emerges after the purchase. This can include covering legal fees associated with defending against claims to the title, as well as any financial losses incurred due to the title defects.

In contrast, the other options are not covered by title insurance. Market fluctuations, property value depreciation, and loan interest rate increases pertain to broader economic conditions and the financial aspects of the property rather than the title itself. Therefore, they do not fall under the risks that title insurance addresses. The focus of title insurance is strictly on protecting ownership rights and any issues arising from the title, making the coverage of financial loss from defects in the title the correct response.