Which of the following is true about title insurance?

Title insurance serves a critical role in property transactions by safeguarding property owners and lenders against potential problems related to the title of the property. The reason that the statement regarding coverage for most legal challenges concerning property title is true lies in the primary purpose of title insurance itself.

When a policy is purchased, it provides protection against various issues that may affect the ownership rights of the property. This includes potential claims from previous owners, unrecorded liens, fraud, or other defects that could arise. Importantly, title insurance covers claims that might surface after the purchase—such as unknown heirs asserting ownership—rather than just those issues that were known at the time of purchase.

In contrast, options that suggest title insurance is mandatory, limited to residential transactions, or only protecting against known issues do not accurately reflect the nature and purpose of title insurance, which is designed to cover a broad range of title-related problems that could arise long after the transaction is completed.