What does the term “title insurance” cover?

The correct answer focuses on the specific purpose of title insurance, which is to provide coverage for losses related to defects in the property's title. This type of insurance is designed to protect the property owner and the lender from financial loss due to issues with the title that may arise. Defects could include issues such as liens, forgeries, or undisclosed heirs who may have a claim to the property. Title insurance ensures that the property owner has clear ownership and can prevent future claims that could jeopardize their rights to the property.

The other options do not accurately describe what title insurance covers. Property damage is generally addressed through homeowners' insurance, while coverage against natural disasters is also not related to title insurance and typically falls under specific hazard or flood insurance policies. Liability coverage for property owners involves a different aspect of risk where the owner might be held responsible for injuries that occur on their property, which is not encompassed by title insurance. Thus, option B best reflects the intent and function of title insurance in the real estate industry.