Picture this:  You just bought a brand new home from a builder.  One month after closing you learn that the   subcontractors who did work on your home are now filing mechanic's liens against your property.  What do you do?

1. You can do nothing and know that those liens are only valid for 12 months.  After that, they either drop off or have to be refiled by said contractors.

2. You can sell or refinance the house, in which case those liens would have to be paid at time of closing.  But this is where title insurance would step in and help you.

If you go to sell or refinance the house, and you incur a financial loss as a result of such a lien, then your title insurance policy would pay for that loss.  It works much like other insurance, where once you incur a loss you file a claim and your insurance company pays on that claim.

Of course, this is the abbreviated version and there is a little more detail to it.  But at least it's good to know that your title insurance policy is there to protect you!