My understanding of title insurance is that if it turns out there's something wrong with the title and you don't really own the house - example, the people that sold it to you didn't own it, or the people that sold it to them didn't own it, or it turns out that some long-lost relative of the deceased prior owner turns up, or there was a lein on the property that no one told you about, or WHATEVER - you get back what you paid for the house instead of losing everything.

This is extremely rare, but does happen. You see it in "News of the Weird" it's that rare.