The term "encumbrance" in title insurance refers to:

The term "encumbrance" in the context of title insurance is defined as any claim or liability attached to property. This encompasses a wide range of interests and rights that may affect the property's title and its use. Examples of encumbrances include mortgages, liens, easements, and restrictive covenants. These claims can limit the owner’s rights to fully enjoy or utilize the property, and they can also affect the property's value and marketability.

Understanding encumbrances is crucial for anyone involved in real estate transactions, as they represent potential legal obligations that can impact ownership and transferability. When obtaining title insurance, buyers need to be aware of any encumbrances that may be listed in the title search, as they represent risks that the title insurance helps to mitigate.

Other options do not accurately capture the definition of encumbrance. Physical damages to a property are concerns not directly related to title issues but rather to the condition of the property itself. A mortgage is indeed an encumbrance, but defining encumbrance solely as a mortgage is too narrow and does not cover the broader spectrum of potential claims. Liabilities associated with ownership transfer are also specific and do not encompass the full range of claims that might qualify as encumbrances on a property title