Title insurance is insurance that protects the property owner and lender from title defects. Even though the title search is conducted by experienced staff of title insurance companies, a chain of title should not be treated as a substitute for title insurance. There may be errors which are not apparent by reviewing the chain of title such as:
1. Deed may have been executed by an incompetent person;
2. Deed may have been forged;
3. There may be problems with a probate which cast doubt on the ownership of the real property;
4. Encroachments and easements;
5. Defects in the public record.
Once a property owner or lender acquires an insurable interest in the property, and if there are title issues the title insurance company will take the necessary action to clear title which may include litigation. If title cannot be corrected, the title insurance company will pay the insured up to the amount of insurance.