Why insurance is the right instrument here
Because the alternative does not exist. Most title problems have a cure — a deed of variation, a release, a retrospective consent. An unknown covenant cannot be cured, because nobody can draft a release of an obligation whose terms are unknown or identify who would grant it.
That makes this one of the few situations where insurance is not a workaround but the only available answer, and where the usual criticism of indemnity policies misses the point.
What the policy does and does not do
It provides financial protection if an unknown covenant or right is enforced against you, resulting in loss or a reduction in the property's value.
It does not remove or nullify anything. The covenants continue to exist and continue to affect the property, and a successor in title takes the land subject to them exactly as you do.
Read the terms. The extent of cover, the exclusions and the circumstances in which the insurer will pay are what you are buying, and the Lexsure wording below is emphatic about reading them.
The questions worth asking before completion
<b>Does the level of cover match the property's value?</b> Policies are written to a sum, and a policy taken out years ago on a cheaper house may be inadequate now. If you are being given an existing policy, check the figure.
<b>Does it pass to successors and to your lender?</b> Most do; confirm it, because a policy that stops with you is a problem for your sale.
<b>Does it cover what you plan to do?</b> Policies frequently exclude future development or alterations. If an extension is part of why you are buying, the cover needs to contemplate it — and that is much cheaper to arrange now than to add later.
<b>Who is paying?</b> Here the seller agreed. That is the usual and reasonable position, since it is a defect in the title being sold.