What does title insurance do? It provides protection to a party owning interest in real estate against loss or damage due to past defects or claims against the interest as insured under a policy.
So what’s really different about this kind of insurance? When you get an auto insurance policy, everything is good at that moment and that policy is going to protect you in the future. You don’t know if you’re going to get in an accident or not and you want to make sure you’re covered in the event something catastrophic happens.
Title insurance is the one kind of insurance that actually covers the past. What it protects you from are things that you may not have known about. The title company’s main job in a transaction is to research all of those things. They make sure that when the closing happens that everything is done correctly and that it is all recorded correctly. They then issue a title policy and assure that you aren’t going to run into problems.
Being that title insurance insures the past, if you close on a home and the next day there is a new lien on the property, the title company will not cover that.