Title insurance is a contractual obligation that protects against losses that occur when title to a property is not free and clear of defects (e.g. liens, encumbrances and defects that were unknown when the title policy was issued).
The terms of the policy define what risks are covered and what risks are excluded from coverage. The title insurer will reimburse you for losses that are covered, up to the face amount of the policy, and any related legal expenses.
This protection is effective as of the issue date of the policy and covers defects arising prior to your ownership. Title companies issue policies on all types of real and personal property. Two types of title insurance policies for real property are common: a lender’s policy and an owner’s policy.