In the United States a system of title registration exists, that requires the lodging of various instruments such as deeds that affect a transfer of title with the local government recorder.

This system remains unsatisfactory as many states do not have any mandatory validation process to signify that the records are a true and complete representation of fact, and many interests may exist which are the product of error or illegality, or simply due to not being registered at all.

Some states have modified their title registration systems to avoid the difficulties that present themselves when various competing claims are made upon a parcel of land, but in the main, the system of title registration is fraught with economic pitfalls for the uninsured.

Title insurance by simple definition would be best explained as a guarantee to a party that it is indeed acquiring a valid new interest in land.

To explain title insurance, a common thread throughout the history of the human race needs to be noticed. People have used various mechanisms to determine the ordering of their relationships and the ownership of their property.
Crucially, land has been essential to human beings throughout the ages, providing sustenance and a means of survival, providing food shelter and materials.

The reference to land title lends itself to the insistence mankind has with ownership, and refers to the right a person has to own land and utilize it for their own purposes.

Across the many nations of the world, countries have assumed ownership of land under many different guises. With the test of time and social advancement, some of these justifications have become more refined, however, the very indestructibility of land has led to many acquisitions of land that have been questionably secured by modern standards, to survive to this very day.

For example, up until the 19th century, many nations such as America, Australia, New Zealand, Fiji, and the Caribbean to name but a few, were settled under the contemporary international law of the time. This found that a new territory could be acquired by conquest or cession, which led to settlement of the new land by conquest or a treaty made with its inhabitants. Alternatively, if it was devoid of aboriginal peoples, it was deemed to be terra nullius which means ‘uninhabited’, and therefore settlement occurred merely by declaration.

Other countries such as the Shetland Islands, Orkney and even some Caribbean nations have declared their land to be of ‘alloidal title’. This denies the ownership of an overlord such as a Crown, and declares land to be held freely due to a natural right.
In England itself, all land is held of the Crown, with certain title interests in land being granted to persons, but with the Crown having a reversionary ownership.

The fact that these title interests can be devolved to heirs on death of the owner of an interest, and the fact that the interest holder is able to alienate the interest to other parties, means that these legal title interests suffer a chain of ownership which theoretically ought to be able to be traced back to the original grant by the Crown.

Of course, in order to prove title to land, this would require the verification of documents that span thousands of years, and that encounter each and every transaction between parties to it. Apart from being impractical, this has led to the development of various systems to validate land title and ownership, and allow for the efficient transfer of land and title interests between people conducting their commercial activities.

If acquiring property for good value, a purchaser, or an individual lending finance with the property as security for the loan, demands a clear title to protect their investment.

Without this security, the risk in purchasing property is exorbitant and would serve to deter participants from the property market.
It is for this very reason that easy title insurance exists.

Regardless of the fact that the system of title registration may exhibit uncertainty, the types of title insurance available seek to cover all the contingencies possible for the various stakeholders in property.

The definition of title insurance is primarily, that while interests in property may exist as that of an owner’s interest and that of a mortgagee’s interest, a guarantee also exists to ensure the interests of both these individuals are protected

Resources:

http://www.socyberty.com/Government/The-Socialist-States-of-America.108891

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=556808

http://plymouthdeeds.org/