Title insurance is a type of protection that is offered to lenders and buyers to prevent financial damages from disputes over property ownership. Title insurance is ordinarily a requirement of most mortgages because it protects homeowners and lenders. Titles are the legal document that grants ownership to a particular person. When you are buying a home, you need a clear and valid title. Liens and encumbrances are a few of the issues that can lead to financial problems with a home's title. Say, for example, that a construction company builds a deck on your home before you purchased it. The company was never paid and files a lien against the property. You do not know about the lien and buy the property anyway. Because there is a lien against your home's title, you are now responsible for the deck's cost. Title insurance would pay the construction company to ensure a clear title.