I’ll answer each question one by one.
1. Title insurance insures that title is free and clear of defects and is marketable. That is, that no one else has an ownership claim to the property or an encumbrance (like a judgment or lien) that defects title.
2. Two different policies are purchased at the closing table: the buyer purchases a policy for the lender so that the lender knows they are lending on property with clear title. The seller purchases a homeowner’s policy for the buyer. So when the buyer turns around and sells it later, they are not paying for the same policy they did when they bought the property.
3. Liability for the title company will be absolved into the title insurance policy; that’s what it’s there for. Instead of suing the title company, you’d file a claim with the title insurance carrier.
4. New policies are purchased with each new buyer because each new buyer is going to have a different lender that needs coverage.
5. I don’t understand your final question. The title insurance policy is there to protect and insure that the deed is free and clear. You can get more expansive policies for more and better coverage. A buyer can always go to a title attorney and get an attorney’s opinion of title, which is more detailed than the abstract of title that a title company runs, but a good policy will cover the title regardless.
