If you borrow money to buy a home or property, a lending institution will probably make you buy a title insurance policy to protect its interest. As a consumer, it's in your best interest to be well-informed about title insurance, how it works, and what to look for in title insurance.

What is Title Insurance?
Title insurance helps provide home buyers and/or mortgage lenders protection against losses resulting from unknown defects in the title to your property that existed before the closing of a real estate transaction.
Those unknown "deficits" could be:

- outstanding liens on the property (e.g., unpaid real estate taxes by a prior owner)
- encumbrances (anything that might hinder the owner's right of ownership; e.g., errors or omissions in deeds, undisclosed errors, fraud, forgery, mistakes in examining records)

These deficits can result in additional costs in the future or even invalidate a home buyer's right of ownership in the property. They might also invalidate the lender's security interest in the policy. Title insurance policies cover the insured party for any covered losses and legal fees that might arise out of such problems.

source: Minnesota State Government Online