Title insurance is obtained by paying a one time fee at the time of closing when you go to buy a house. Different people pay the cost of the title insurance in different states, but the fact remains that title insurance is almost always required by the lender in the event of a problem with the title. Of course, title problems are searched for before closing begins, but they are not always found… especially of they are of a more unscrupulous nature, such as fraud or forgery. In these cases, title insurance will pay losses, court fees, and entitlements that would otherwise put a huge financial strain on the buyer.
Lenders require title insurance mainly to protect themselves and the buyer from obligation in the event of a title problem. If a problem does arise after the buyer has obtained title insurance, then the title insurance company will take care of any problems that the buyer would have had to pay for out of pocket. Such problems include fraud, forgery, missing heirs, conflicting wills, and some others. Lenders require title insurance to tie up any of these possible loose ends before the closing so that the borrower is protected. This is just a common sense way to handle unforeseen title problems, and is usually a measure required by a lender before they will approve a loan.
This just serves to make the process easier, and to help eliminate what could be another potential problem before it even arises.