How Homebuyers Benefit From Title Insurance

With the passage of Real Estate (Regulation & Development) Act, 2016, the troubles for home buyers are expected to get over soon. High penalties and mandatory registration are few clauses added in the law to save buyers from frauds and possession delays. The inclusion of compulsory insurance against land title is another step in this direction that will give extra cushion to the home buyers as well as to developers.

PropGuide takes you through title insurance and its proceedings-

What is Title Insurance?

Title insurance protects the policyholder/potential owner of a property against possible financial loss caused due to defects in property title, disputes or frauds. It was last year when Insurance Regulatory and Development Authority of India constituted a seven-member committee to study the scope of such policies in the Indian market. The policy is designed in a way to safeguard financial interest of real estate owners, investors, lenders against property issues. Real Estate Law specifically talks about the importance of project insurance to safeguard stakeholders' interest in the case of land-related dispute.

What does Title Insurance cover?

Since the concept of title insurance is new, the product has been designed keeping in mind Indian market conditions where some states lack digitised records. Keeping in mind such situations, here are some of its provisions:

-          Defect in, or lien on the title at the date of cover including but not limited to, indemnification of loss from a defect in the title caused by-

• Forgery, fraud, undue influence, duress, incompetency, incapacity or impersonation
• Failure of any person or entity to have authorised a transfer of conveyance
• Document affecting title, not property created, executed, witnessed, sealed, stamped, acknowledged, notarized or delivered
• Documents affecting title executed under a falsified, expired or otherwise invalid power of attorney.

Defence costs: If the property title is challenged in court through litigation, the entire proceedings will be covered by the insurance.

Out-of-court settlement: Expenses incurred during out of court settlements with other party is also covered under insurance. This also includes compensation to be made to the parties involved. However, the petitioners should not be the co-owner, co-borrower for the property.

How is Title Insurance useful for home buyers?

Title insurance will be taken up by the developer at the time of project registration. The premium is paid by the developer until the construction is completed. The policy is transferred to the Apartment Association along with power of attorney and other documents. Henceforth, the insurance should be renewed each year by the registered authority of the project.  

Service providers in India

Since the concept of Title insurance is comparably new and belongs to European and American markets where the land records are already systematically fed, service providers will be facing a challenging situation in India where land details are either completely manual or partially digital in select states. Therefore the cost and time involvement will be more, which will be borne by the insurer. Currently, Bajaj Allianz and ICICI Lombard are in talks with First American Title Insurance Company to offer reinsurance support. Marsh is another global service provider offering title insurance in collaboration with National Insurance Company Ltd and New India Assurance Ltd.  

Also Read: What Home Insurance Companies Offer To Homeowners