Title insurance protects the owner against which of the following?

• A. Market Fluctuations
• B. Unknown Encumbrances
• C. Physical Damage
• D. Current Encumbrances

Answer: (B)

Title insurance protects the owner against unknown encumbrances—claims or liens that were not discovered in the title search and could threaten the owner's ownership rights after purchase. These are problems that existed before you bought the property but weren’t found in public records at the time of closing, such as undisclosed liens, forged or defective past transfers, or other hidden defects in the chain of title.

Market fluctuations affect property value, not the validity of the title. Physical damage is covered by property or homeowner’s insurance, not by title insurance. Current encumbrances that are already on the record at closing are typically listed as exceptions in the policy and aren’t insured by the owner’s title policy.