Most insurances cover you for events that occur in the future. Title insurance covers you for events that typically have occurred in the past. It is title insurance that indemnifies the individual policyholder to the rights to market the title.
One way of looking at title insurance is that it insures the owner that the property, the title deed, can be conveyed and sold to another without defect or encumbrances.
Of course those are multi-syllable words to mean that a title insurance policy is insurance that covers cost or damages that may occur stemming from events that have taken place typically in the past such as liens, estates, taxes and someone. Those kinds of occurrences are typically referred to as defects because they pose a transferable issue on the ability of the owner to transfer the title deed to another party.
If you’re buying a home and taking out a mortgage, you will be required to purchase a title insurance policy.
But even if you were buying the property for all cash, it would behoove you to purchase a title insurance policy for the protection of that property’s title and for its sale in the future.
Title insurance also protects the policyholder from the claims that may arise from claims made by others. Oftentimes there are easements that are not obvious or conspicuous that may affect the use of the property by another party.
This is where title insurance comes into play. The title policy will be able to pay and defend that claim to the amount of the policy’s value.
One of the misnomers about title search is that once it is conducted, a buyer could consider it a legal opinion; but a title policy, what title insurance actually covers is the property title should there arise a defect or a claim of ownership that was not discovered in the title search. Such defects include taxes, liens, forgeries, fraud, estates in missing heirs, and even recording mistakes.