Title insurance protects an owner’s legal right to own and use their property and covers both the homeowner and buyer if an issue is discovered with the title of the home.
But is it worth it or is title insurance a waste of money?
Find out in the article below.
What is Title Insurance?
Title insurance is a form of property insurance that covers the title to a home. In other words, it protects the owner’s legal right to own and use their property.
Title insurance protects homebuyers and owners from financial loss if a problem with their property title is discovered, such as:
In Australia, title insurance is not as common as in other countries. Some people believe it’s a waste of money, while others believe it is essential for protecting your investment.
- a debt on the property;
- a competing ownership claim for the property;
- a non-compliant structure or unapproved property renovation; or
- an issue with boundaries that leads to a problem.
You can take out a title insurance policy if you are:
- A homeowner
- A commercial property owner
- A residential mortgage lender
- A commercial mortgage lender
What does title insurance cover?
Title insurance covers the policyholder against any financial losses that could directly result from problems with their property title. Some of the most common problems that title insurance covers and which are usually included in the title insurance cost include:
- any illegal or non-compliant building works completed by previous owners without council approval, such as structures, buildings, or renovations;
- local councils’ or conveyancing practitioners’ errors when reporting charges like rates and land taxes;
- compulsory land acquisitions by the government;
- wrong public records for heritage issues, easements, drainage and sewerage problems;
- boundary errors and encroachments;
- Third-party claims to interest or rights on the land;
- Fraud and forgery;
- Registration and documents gaps.
Even though you’ve completed the process of paying off a house mortgage, title insurance is always a good preventive measure to avoid unpleasant situations and dealing with mortgagees.
What to consider before getting title insurance
There are a few things you should think about before signing up for title insurance. We will discuss them below.
Do you actually need title insurance?
In most cases, you will only need title insurance if you take out a mortgage on a property. If you are buying a property outright, you won’t need title insurance.
However, there are some exceptions. For instance, if you are buying a brand-new property, you may need title insurance to protect yourself against any issues with the property title.
Is title insurance a waste of money in Australia?
Many Australian home buyers and owners ask themselves ‘Is it worth getting title insurance in Australia?’ before getting it. To answer this question, you mostly need to think of some factors surrounding the title insurance cost:
- Taking out a title insurance policy is a one-off; so for a few hundred dollars at the most, you’d be protected against any unforeseen problems with the property title.
- Title insurance is usually cheaper than other types of insurance (such as mortgage insurance).
- The most common problems that title insurance covers are usually included in the title insurance cost.
- It is good to seek legal or conveyancing advice to see if extra coverage is appropriate for you.
- You should carefully read through the policy documents and product disclosure statements to understand what you’re paying.
If you’ve applied for a home loan in Australia, you should consider getting title insurance just to tick off the boxes.
1. How is title insurance different from other insurance types?
While some types of insurance are paid monthly or annually, title insurance has a one-off payment. It is also cheaper when compared to other types of insurance, such as mortgage insurance.
2. What is the primary purpose of title insurance?
The primary purpose of a title insurance policy is to protect the buyer and lender from any losses that may occur due to defects in the property title.
3. Is title insurance a waste of money in Australia?
Not at all. While title insurance is not required by law in Australia, it is an affordable way to protect yourself (as the owner or buyer) from potential issues with the property title.
