- 1 What is Title Insurance and Why Might You Need It?
- 2 When is Title Insurance Required?
- 3 What Issues or Risks Can Title Insurance Protect Against?
- 4 Will The Insurance Company Buy The Property Off Me If There Is a Problem?
- 5 Be Aware Of Your Title Insurance Policy Terms and Conditions
- 6 Key Points To Look Out For Are
- 7 Disclosing Information For Title Insurance
- 8 To Buy or Not To Buy?
- 9 Frequently Asked Questions
What is Title Insurance and Why Might You Need It?
Title insurance is essentially a type of indemnity insurance which can cover you against any loss of value or the cost of any legal claims that may arise with the purchase or sale of a property. In recent years, the use of title insurance has increased considerably, due to people losing their original title deeds, banks being risk averse and the problem of limited, incomplete or outdated information kept by the Land Registry.
If there is a query over the title deeds, your mortgage provider will very likely insist that you buy title insurance. This is to protect their interests should your property need to be repossessed. If it becomes essential for you to purchase title insurance in order to get a mortgage and buy the property, we will guide you through the process and help you choose the right policy.
When is Title Insurance Required?
There are a number of instances when title insurance might be required.
For instance, if everyone wants to move quickly, resolving an issue might take months and considerably hold-up the moving process, potentially deterring some interested parties from following through with the sale altogether. Often, in cases like this one, we may suggest obtaining title insurance to prevent the hold-up.
Lenders or potential buyers are not always prepared to take risks if something is not 100% right with the property. However, invested parties are usually happy to proceed if appropriate title insurance is put in place against any identified risk.
While getting a title insurance policy does not remove the issue you have insured against, it does protect you financially. Should the potential issue arise, the insurance company will generally compensate you for any reduction in the value of the property caused by the problem.
However, you will only be protected if your claim is accepted by your insurance company and you have complied with the policy conditions.
What Issues or Risks Can Title Insurance Protect Against?
There are dozens of different title insurance policy types which protect against a wide variety of problems, but some of the more common examples include:
• Lost deeds and title documents
• Restrictive covenants against a particular use or building work on the land
• Lack of access rights from the highway or claims by highways authority for maintenance costs
• Failure to get planning or buildings regulation consent
• Chancel repair liabilities
• Lack of drainage or water easements
• Homeowners Protection Policy (HOPP) – comprehensive ‘all risks’ cover. Worth considering, as it includes the growing threat of fraud and identity theft
While this choice can be overwhelming, we can run through all the risks that might be relevant to you and advise you on which type of insurance policy you should get to ensure you’re protected from all angles.
Will The Insurance Company Buy The Property Off Me If There Is a Problem?
Your title insurance provider will not buy a property off you if there is a problem. They will only pay you the loss in value caused by the specific problem you insured against.
It is generally up to the insurance company to decide how best to deal with claims made under the policy. For instance, they may consider it more cost effective to settle a claim than get involved in lengthy litigation, especially if your opponent has a good case. However, should they pursue a case in court, if they lose you should still be compensated for any loss of value to your property.
For instance, if a neighbour seeks legal action over an extension on your property that was built in breach of a ‘restrictive covenant’ and they win the case, you may have to demolish the extension. But you should be compensated for any adverse effects this may have on the value of your property. If you won the case, then you would be able to keep the extension.
Be Aware Of Your Title Insurance Policy Terms and Conditions
Not all policies are the same and some have surprising exclusions. We will always advise you if there are any unusual terms or conditions on a policy.
Key Points To Look Out For Are:
• Many insurers have time limits for making claims and require you to notify them as soon as you think there might be a claim, rather than waiting to receive formal letters or notices of court action.
• Many policies will not cover claims if you make alterations or change the use of the property.
• Many policies say you must not disclose the existence of the policy to anyone who might potentially claim against you.
• Policies generally only cover the specific risk you have insured against.
• If the problem that you have insured against arises, don’t try and sort it out yourself as this may invalidate the policy.
Disclosing Information For Title Insurance
Like all insurance policies, it’s vital that all relevant information is disclosed to the title insurer before you take out a policy. Insurance law is very strict and failure to disclose any important factors may render your insurance policy void and worthless.
If we’re arranging title insurance on your behalf, it’s important that you tell us everything you know about the problem so we can pass the information on to the insurance company. For example, if the seller’s neighbour has made verbal complaints, written letters, or objected to a planning permission, we need to know about this.
To Buy or Not To Buy?
Even if you buy title insurance, there will always be a risk that the problem you have protected against arises. In most cases insurance companies will settle a claim, though this could take at least several months to resolve. If the insurance company fails to resolve the problem you should still receive financial compensation, normally equalling the reduction in value to your property.
There will be some cases where it is better to get the seller to resolve the problem before you buy or it may be appropriate to seek a price reduction to cover the cost of any work. In very rare cases it may even be better to buy another property altogether.
We are here to offer impartial, expert advice on matters relating to title insurance and suggest the best course of action in your unique circumstances.
Frequently Asked Questions
About 10% of claims by policyholders are refused meaning the policy holder has to deal with the issue themselves.
Most claims against policies are settled within 6-9 months of the policy holder making a claim.
Conveyancers get no commission or payment at all from any of the insurance companies or intermediaries that they arrange title insurance with. This means there is no hidden benefit for us in suggesting title insurance as a way of tackling a problem.