Mention the word insurance and most people immediately think car, home and contents. But have you heard of title insurance?
Title insurance is a relatively new product in Australia, but it’s becoming increasingly popular.
Broadly speaking, title insurance is a specialised type of insurance that provides home buyers with protection against certain unknown and hidden risks which may exist at the time of purchase.
You may be thinking, what could possibly go wrong? I’ve paid for my property; the title is in my name – everything is fine. Unfortunately, things aren’t always that si
mple. Many potential issues could arise, and if not protected by a title policy, you could be left footing the bill.
How is title insurance different?
Unlike home or contents insurance which protects you against future events, title insurance protects you against unknown or hidden past events that may put your property title at risk. One example is incorrect signatures on the title document or forgery.
Unlike most other insurances, the second significant difference is that there are no yearly premiums. Instead, you pay a one-off premium which covers you for the time you own the property. One payment and you get peace of mind.
Do I need home buyer’s title insurance?
Imagine buying a property only to find out later that the person who sold it to you didn’t have the right to do so. Or there could be an issue with the boundary lines, meaning your neighbour encroaches on your land. If you don’t have insurance on your title and something like this happens, you’ll have to bear the cost of putting things right yourself.
Title insurance protects you from unknown and hidden problems at the time of purchase life:
Survey/boundary defects- Registration gap
- Fraud, forgery and identity theft
- Planning and title defects
- Outstanding rates and taxes
Real-life title claims
How does insurance on your title play out in real life? After all, we’ve all heard horror stories about people who have paid for their property, only to find out later that there were hidden problems with the title. Here are some examples of actual claims made on title insurance policies:
Encroachment
A couple bought a house in NSW, only to discover that the neighbours had been encroaching on their land for years. The couple was able to claim $10,000 from their policy to have the boundary issue rectified.
Non-compliant renovations
In Western Australia, a property owner insured with Stewart Title bought a renovated home in Shoalwater. Following the settlement, the insured discovered that the balcony balustrade and windows were non-compliant. Consequently, the City of Rockingham issued a notice requiring rectification. All of which equated to $20,000. Fortunately for the insured, Stewart Title Title paid all the costs associated with the rectification.
Encumbrances
In Victoria, a man bought a property at auction, only to find out later that there were two mortgages on the property which he was now liable for. The man was able to claim $160,000 from his policy to cover the outstanding debt.
Encroachment on council land
Another example in Western Australia Stewart Title gives is an encroachment on council land. The insured bought a property for $1.6 million. However, when the insured sold the property sometime later, significant encroachments on council land were discovered during the settlement process. Structures like retaining walls, gardens, and the driveway were all in question. All of which the insured (seller) was liable for even though they were unaware of the issues when they bought the property.
Consequently, the Buyer threatened to terminate the sale contract and sue for damages for breach of warranty or General Condition.
Stewart Title agreed to negotiate the acquisition of Council land. But if the acquisition of Council land was not possible, Stewart Title agreed to fund the demolition and rebuild of encroaching structures and pay the loss in the market value of the land.
Unpaid rates
A woman in Queensland bought a property, only to find out that the previous owner hadn’t paid the rates for years. The woman could claim $4,000 from her title insurance policy to cover the outstanding rates and taxes.
As you can see, title insurance provides important protection for home buyers.
Conveyancer’s advice combined with insurance
A conveyancer’s job is to check for any potential risks that might exist on the title. However, they can’t foresee everything, and that’s where title insurance comes in.
Insurance on your title provides an extra layer of protection, giving you peace of mind that you’re covered against any hidden risks.
If you’re thinking of buying a property, make sure you ask your conveyancer about your options for insuring your title. Either way your conveyance will:
- make sure the property title is free of any financial or tax encumbrances by
conducting a thorough title search, - confirm there are no illegal structures or non-compliant structures on the
land, and - ensure there are no boundary issues.
Kerry Cable, Strand Legal and Conveyancing’s Business Manager, explains, “Title insurance does not replace the role of a conveyancer. Instead, settlement services combined with the insurance gives you comprehensive protection against risks down the track.”
Torrens Land Registration
Many people don’t realise that almost all land is subject to Australia’s Torrens Land Registration system. As a result, your State or Territory guarantees the validity of your certificate of title.
The system is designed to provide homeowners with greater security of ownership. In the past, someone could assume your identity and sell your home without you even knowing. The Torrens Title Registration System makes this much more challenging to do. However, there are still risks associated with owning property, which is why title insurance is so important.
For example, the Torrens system does not guarantee the accuracy of your property’s boundaries. So, if your neighbour decides to build a fence or shed right on the boundary, you may have no recourse. This is where insurance on your title comes in, as it can protect against boundary disputes.
Another example is if someone forges your signature on a transfer of land document and sells your property without you knowing. The Torrens system does not protect against this kind of fraud, but title insurance can.
As you can see, insurance on your title provides essential protection for homeowners, even if your property is registered under the Torrens system.
Is insurance on my title right for me?
Whether title insurance is right for you depends on your personal circumstances. You may decide you don’t need it if your conveyancer has provided a clean bill of health and you’re confident there are no risks associated with the property you’re buying. However, many choose to take out insurance on their title for peace of mind. After all, it’s better to be safe than sorry when dealing with such a significant investment.
The good news is that insurance on your title is relatively inexpensive. For example, the cost of title insurance on a $500,000 property is typically around $730. Overall, the value of the land dictates the insurance premium, which is why the price may vary.
“Insurance policies on titles are available for vacant land, strata properties, commercial and residential property,” explains Kerry.
“To find out exactly what is covered, we ask potential title insurers to provide all relevant insurance policy documents and product disclosure statements so our clients can make an informed decision.”
Protecting your home investment
While this type of insurance is relatively new to Australia, the most common claims filed against a title are illegal structures and boundary breaches.
Importantly, insurance on your title doesn’t protect against issues newly created by you after purchasing the property.
As you can see, if you’re thinking of buying a property, taking out an insurance of your title is an important consideration. There is a lot to be said for peace of mind knowing you have protection against a range of risks.
Need more help?
If you’re still unsure whether insurance on your title is right for you, contact your conveyancer or talk to Kerry Cable at Strand Legal and Conveyancing.
Kerry can help you understand potential title risks and whether title insurance coverage is the best option for your property and circumstances.
Email Kerry Cable today or call (08) 9381 0500.
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