The policy protects against claims against the title--by encroaching neighboring properties, by earlier conveyances done improperly, or by the taking of land by adverse possession (this is an arcane bit of legal terminology, but I actually had a policy once that paid off in a case where the prior owner had let an abutting property owner continue to use a corner of the property, and that adjoining neighbor succeeded in changing the boundaries going forward). Titles come in different categories, since certain types of owners, especially banks and estate executors often convey only what they got, as a hedge against a mistake made by a previous owner before they got involved. Relocation companies also convey only what they received, for the same reason.
All of this may be more nitty gritty than the average buyer needs to know, but it's helpful to know what you are paying for, and to be aware that sometimes, and I'm working on one such problem now, an impending closing will uncover earlier conveyances done improperly, which can affect a sale from the current seller. Once in my career, I've had an entire chain of back-to-back closings fall through, due to the inability of the first seller in the queue to "convey clear title", the phrase you will see in most real estate contracts. Although this is extremely rare, that's why mortgages generally require title insurance as a condition of the loan, meaning that you cannot usually choose to bear this risk yourself. Even if you wanted to do so, you'd not want to resell later without having it. Any specific questions can be addressed to the closing attorneys, who deal with these issues on a daily basis.
