What type of agreement is title insurance classified as?

Title insurance is classified as an indemnification agreement. This form of insurance is designed to protect policyholders from financial losses related to title defects, liens, or other issues that may arise after the property has been purchased. When a buyer secures title insurance, the insurer promises to compensate the policyholder for any losses incurred due to covered title issues, effectively indemnifying them against potential financial harm.

This is distinct from the other classifications. A guarantee usually implies that a party will fulfill certain obligations or promises, which is not the primary function of title insurance. A warranty typically involves a promise that specific conditions or guarantees about the property are true, which may not adequately cover the scope of risks related to title defects. Errors and omissions refer to liability coverage for professionals (such as real estate agents or attorneys) for mistakes they may make in the course of their profession and do not align with the protective nature of title insurance for property owners. The indemnification role of title insurance effectively encapsulates its purpose of providing financial protection against potential losses linked to title issues.