Title Insurance: Coverage, Claim & Exclusions

Updated: 01-10-2019 12:58:36 PM

Every time a property is sold and bought, the ownership changes. The process of buying and selling of land or property can be associated with issues like undisclosed pending legal action or fraud. It’s not easy to know these facts at the time of purchase. This is where title insurance comes into play.

What is Title Insurance?

A title insurance is a form of indemnity insurance which protects property owners and buyers against financial losses caused as a result of defect in the title or ownership of the property. It helps to protect property owners and buyers against past ownership claims and fraudulent transactions. It helps to protect the property buyers against past claims and potential future losses. Here the title refers to the person(s) who has the legal ownership and the right to use a piece of land or property.

What all Title Insurance Covers?

The insurance offers protection against following points:

• Frauds like forgery or impersonation
• Litigation costs
• If a title dispute arises during a sale, the insurance company will cover the cost incurred for legal damage
• Expenses are covered if there is a need for settling the matter out of court by giving compensation to the associated parties
• Covers fraud, issues not discovered prior to the commencement of the policy

Eligibility Criteria

• It is meant for real estate developers, housing finance companies and property investors
• It is a long-term policy ranging from 5-15 years

Claim Process for Title Insurance

Below are the general steps for claim process:

• Inform the insurance company within 45 days of the occurrence of the event for which you need to file the claim
• Insured must submit the claim form along with the supporting documents within 90 days from notifying about the claim
• In case of any claim by a third-party, the insurance company will indemnify property buyers to the extent of the loss incurred by them

Documents Required for Claim Process

Below are some of the documents which the insured have to submit for timely claim settlement:

• Duly filled in claim form
• Title document or registration of the title document
• Property documents
• KYC documents
• Details of lawyer’s fees

Exclusions under Title Insurance

An insurance company is not liable to pay, if the claim arises because of the following event/s:

• Changes in the Insured Use of the Property
• Any statutory rights relating to coal, petroleum and other such substance which may be on or under the Property
• Any claim arising due to misrepresentation by the insured during the investigation
• Claims arising out of missing government records
• Any claims affecting the title due to political matters
• Claims related to tribal rights over agriculture lands

Renewal Process

Title insurance can be renewed only by mutual consent and subject to payment in advance of the total premium. If the property buyer doesn’t renew his policy, it will automatically terminate at the end of the policy period.

Companies offering Title Insurance in India

HDFC Ergo is the only insurance company to provide title insurance in India.

Important Aspects

Listed below are some of the points which the insured should know about Title Insurance:

• The buyer should get written affidavit from the developer which states that the ‘legal title’ to the land contains legitimate documents of ownership
• Developers can avail title insurance when they are applying for registering their project
• Property owners and buyers should know the coverage provided by the insurance company as well as exclusions related to the plan
• Individual homeowners are not yet included in such insurance policies. However, both the commercial and residential properties are eligible to get the plan

Advantages of Title Insurance

• It protects the interests of owners, lenders and investors from any monetary losses
• Protects property buyers against loss due to problems in land title defects discovered after the purchase
• Reduces the risk factor involved in real estate transactions

FAQs

Q1. Who can avail a title insurance policy?

It can be availed by developers and later on can be assigned to the members of the housing societies who are the ultimate beneficiaries of this policy.

Q2. Is purchasing a title insurance mandatory?

As per the recent changes in RERA Act, it is mandatory for property owners to buy a title insurance.

Q3. How can I benefit from title Insurance?

Every time a property is purchased or sold, it gets transferred to the new owner. The title deed gets exchanged and transferred. This can lead to defect in the title itself. A title insurance can help developers and buyers to protect themselves from any financial losses related to claims towards the property.

Q4. How can one cancel the policy?

This policy is issued on a multi-year pre-paid basis and cannot be cancelled by an insurance company and the insured. However, if the insured tries to conceal or misrepresent a material fact related to this policy, title insurance will be cancelled and no premium will be refunded.

Q5. What do we mean by Sum Insured?

This is the maximum amount of money that the property owner/buyer can get as claim from the insurance company.