Title insurance is crucial for a homebuyer because it protects you and the lender from the possibility that your seller does not -- or previous sellers did not -- have free and clear ownership of the house and property and, therefore, cannot rightfully transfer full ownership to you. Sourced from: http://www.nolo.com/legal-encyclopedia/title-insurance-buyer-needs-36126.html
The chances of calling on the title insurance are slim, but, it comes as a great help in cases where the title transfer is not smooth.
The initial cost of the insurance is based on the value of the title. Sourced from: http://myinsurance.co.ke/real-estate-insurance/
1.Standard coverage handles such risks as: Forgery and impersonation Lack of competency, capacity or legal authority of a party Deed not joined in by a necessary party (co-owner, heir, spouse, corporate officer, or business partner) Undisclosed (but recorded) prior mortgage or lien Undisclosed (but recorded) easement or use restriction Erroneous or inadequate legal descriptions Lack of a right of access and Deed not properly recorded 2.An extended coverage policy may be requested to protect against such additional defects as: Off-record matters, such as claims for adverse possession or prescriptive easement Deed to land with buildings encroaching on land of another Incorrect survey Silent (off-record) liens (such as mechanics' or estate tax liens)and Pre-existing violations of subdivision laws, zoning ordinances or CC&R's. Post-policy forgery Forced removal of improvements due to lack of building permit (subject to deductible) Post-policy construction of improvements by a neighbor onto insured land and Location and dimensions of insured land (survey not required). Sourced from: http://www.firstam.com/title/resources/reference-information/title-insurance-reference-articles/q-a-about-title-insurance.html