What is title insurance and what does it protect against?

Title insurance is a policy that protects the insured party against financial loss from defects in title that were not discovered during the title search, such as forged documents, undisclosed heirs, recording errors, missing liens, or boundary disputes. There are two types: a lender's policy that protects the mortgage lender for the loan amount, required by virtually all lenders, and an owner's policy that protects the buyer for the purchase price, optional but recommended.