Which statement best describes title insurance?

Title insurance is designed to protect property owners and lenders from potential financial loss due to defects in a title to a property. Among the options provided, the statement that it protects against unknown claims on a property is the most accurate representation of the purpose of title insurance.

When a title company issues a title insurance policy, it conducts a thorough search of public records to identify any issues or claims associated with the title, such as liens, encumbrances, or ownership disputes. However, despite these efforts, there may still be unknown claims that could arise after the purchase, which could affect ownership rights. Title insurance offers coverage that helps mitigate the risk of financial loss from these unforeseen challenges, providing peace of mind to both buyers and lenders.

The other options do not accurately capture the essence of what title insurance provides. While it may be beneficial in many transactions, it is not a requirement for all property purchases. It also does not guarantee that a property will appreciate in value, nor does it cover physical damages to the property, which are typically addressed by homeowner's insurance or property insurance policies.