Title insurance is a contract to indemnify against losses arising through defects in the title to real estate. If the title is insurable, the company guarantees against loss due to any defects in title not specifically set forth in the policy. It also pays all expenses in defense of any lawsuit attacking the title as insured.
When you buy a typewriter, a television set, or a computer, you have no need to know whether the former owner is married, single, or divorced. You are not interested in whether taxes have been paid or if there are lawsuits or judgments against them. But when you buy real estate, all of those things are vital to know-and many other things also. A buyer and a lender must have a complete investigation made on every point or you may discover that the property you bought and paid for is not actually yours at all!
In every real estate transfer the matter of title examination invariably arises, and that is usually followed by a question as to the need/nature of title insurance. Admittedly, the ordinary consumer/home purchaser often questions whether title insurance is really necessary when an examination of the title has been completed by an accomplished title examiner or real estate attorney, especially if the examination of available title records shows no adverse information which might raise questions as to the marketability of the title.
"But I have a deed and a title search was originally conducted," many people say, "isn't that all I need?" No! A deed is not proof that the seller is actually the owner. Nor does it contain information regarding the rights others might have in the property, unpaid taxes, mortgages, easements and restrictions. "Can't I find out about their rights from the public records?" Yes, most of them. However, all of the necessary information is not contained in a single book, in a given office, or even in the same County. Add to this possible errors in indexing, improper searching, errors in examination ... in other words, the human element. Besides, what is not in the public records is often what causes title trouble!