Title insurance provides you with a safety net in case your title, after you become the owner, is in some way defective. As examples, a lender who financed the previous owner's purchase might assert that there is a mortgage against the timeshare and threaten to foreclose on the timeshare unless you pay off the debt. Or it turns out that the seller wasn't the legal owner or didn't have the right to sell to you because of divorce complications, unrecorded deed transfers or other issues.
If one of those bad things happens, you could lose your ownership. If that happens, the title insurance company will pay you whatever your damages are or the amount of the policy, whichever is less.
Obtaining such insurance is automatic when buying a home where a lender is involved. The lender will insist that you purchase such insurance so that the lender's rights to foreclose are protected. As an owner, you would want the insurance because loss of your home due to a defective title would likely be a staggering financial hit for you.
There are some different factors in play with a timeshare. First, the amount you will invest in a resale is nominal compared to the purchase of a home. It would be rare that the loss of the timeshare would be a severe financial loss. Second, many of the defective title issues that exist with homes are not present with timeshares. For example, most timeshare loans are written as consumer loans rather than mortgages and the lender rarely has the right to foreclose. There might be outstanding maintenance fees that could cause a problem, but....
It's much easier with a timeshare than with a home for you to do the due diligence to minimize the risks of a defective title by contacting the resort/developer and asking questions and/or requesting estoppel information. That's particularly true if you can determine that the seller purchased directly from the developer, meaning that there has likely been only a single owner prior to your purchase. (You might need written authorization from the seller for the resort/developer to be willing to give you info.) See this
TUG Timeshare Purchaser's Checklist for info on questions - including many questions unrelated to title issues - that you might want to ask before making a purchase.
No one has ever reported here of losing a timeshare due to a defective title. Can it happen? Sure? Does it happen? Not very often.
For those reasons, very few TUGgers purchase title insurance.
If you decide to get title insurance, expect to pay $250-$500 or so, depending on the state and the purchase price.