What types of losses can the Closing Protection Letter specifically cover?

The Closing Protection Letter (CPL) is a unique document designed to provide specific coverage for losses that may arise during the closing of a real estate transaction. Its primary purpose is to protect against potential risks that could result from the actions of a title agent or the closing process itself.

The correct choice focuses on a well-defined aspect of the CPL's protection: it covers losses stemming from theft of settlement funds or fraud. This is especially important in real estate transactions where significant amounts of money are exchanged, and improper handling of funds can lead to significant financial loss for the parties involved.

While errors in title search records and disputed ownership claims are critical issues in real estate transactions, the Closing Protection Letter does not extend its coverage to such issues. Instead, it specifically targets the risks of fraudulent activities and mishandling of funds, thereby aiming to ensure that the buyer and lender are safeguarded against the financial consequences of these particular risks.

In summary, the Closing Protection Letter is designed with a specific focus, underscoring the importance of financial security during closings rather than addressing broader title-related issues, which are typically dealt with through title insurance policies and other legal remedies.