A very simple explanation of title insurance and why it is important for every homeowner courtesy of www.ctic.com:
Title policies insure owners and lenders against possible losses from claims against real property ownership. The preliminary report or commitment provides advance information on matters which will be excepted from coverage. Lenders and owners are thereby given an opportunity to correct title flaws before purchasing or lending.
Title insurance originated in the 1870’s to stem a series of land ownership problems that developed from inaccurate record searches, forgeries, and related problems. Today, it offers protection from certain items that cannot be determined from public records, such as forgeries of all types, undisclosed heirs, hidden marriages and divorces, clerical errors, and invalid legal procedures and interpretations.
Policies are written on the basis of a search of public records and other records which impart constructive notice. Remember, a deed does not prove that the seller is the owner of the property. Only title insurance can protect your interest in the property from unknown encumbrances, legal conflicts and unforeseen claims.
A policy of title insurance is like a pre-paid legal agreement. Your insurer will provide legal defense against challenges to your insured title (dependent, of course, upon the type of policy coverage ) and will reimburse you financially for losses due to the covered defects in your ownership rights.