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A "mechanic's lien" is a legal claim that contractors, subcontractors, or suppliers can place against a property when they have provided labor, materials, or services but have not been paid for them. This lien serves to protect the rights of those who contribute to the improvement of a property by allowing them to secure a payment obligation. The significance of a mechanic's lien lies in its ability to encumber the property, meaning that the property cannot be sold or refinanced until the lien is resolved, which incentivizes property owners to pay for the work completed.

The other choices do not align with the definition of a mechanic's lien. An agreement between contractors and homeowners typically involves terms of service or payment but does not create a legal claim against the property. A type of insurance required for contractors does not pertain to the legal mechanism of securing payment for unpaid labor or materials. Lastly, a financial loan for construction projects is a funding source, distinct from the legal claim mechanism that a mechanic's lien represents.