What does an American Land Title Association (ALTA) title insurance policy cover?

The American Land Title Association (ALTA) title insurance policy is designed to provide comprehensive coverage that includes both recorded and off-record encumbrances. This broad coverage is essential for protecting the property owner or lender against various risks that may not be immediately apparent in public records.

Recorded encumbrances generally include liens, mortgages, and easements that are filed with local government offices. However, many potential issues can exist that are not recorded, such as certain claims from prior owners, undisclosed heirs, or even fraud that could affect ownership rights. The ALTA policy addresses these off-record concerns, which provides policyholders with enhanced security and peace of mind.

Thus, the correct answer accurately reflects the extensive nature of the coverage provided by ALTA title insurance, ensuring that buyers and lenders are protected against a wide range of potential title defects. This level of protection is crucial in the real estate market, where issues can arise long after a transaction has been completed.