You’ve signed the contract, paid the deposit, and you’ve organised conveyancing lawyers – congratulations on purchasing your new property! But before you pop the champagne, have you thought about title insurance? It’s an important component of any real estate transaction, yet many homebuyers don’t fully understand its purpose and importance.
Title insurance is a form of indemnity insurance that protects property buyers and lenders against losses or damages resulting from defects in the title to a property. Unlike other types of insurance that cover future events, title insurance focuses on risks related to past events that may affect the property’s ownership.
Key Reasons Why It is Important for Homebuyers
Title insurance is often overlooked, especially by first-time homebuyers, however, it plays a vital part in protecting homeowners from unforeseen legal issues that could arise with the ownership of a property.
Protection against hidden liens and encumbrances – This insurance is designed to safeguard purchasers against any undiscovered liens, judgments, or encumbrances that may be attached to the property. Any hidden issues could potentially threaten the homeowner’s right to the property, and title insurance provides the necessary coverage to address such problems.
Ensures a clear title – Title insurance verifies that the seller has a legitimate and clear ownership of the property, free from any disputes or claims. This gives the new buyer peace of mind, knowing that they are acquiring the property with a valid and unencumbered title.
Covers legal expenses – In the event of a title dispute, title insurance can cover the legal fees and costs associated with resolving the issue. This protection can save new owners from significant financial burdens that could arise from such legal complications.
Protection against fraud and forgery – Title insurance provides coverage against fraudulent activities, such as forged documents or identity theft, that could jeopardise the homebuyer’s ownership rights.
How Title Insurance Works
Before issuing a title insurance policy, the insurance company will conduct a thorough search of public records to identify any existing issues with the title. They will examine and review past deeds, wills, trusts, and other documents to ensure that the title is clear and marketable.
Once the title search is complete and any identified issues are resolved, the title insurance policy will be issued. There are two main types:
Owner’s Policy – Protects the property owner’s interests.
Lender’s Policy – Protects the lender’s interests.
Unlike other insurance policies that require regular renewals, this insurance is typically a one-time purchase. The owner’s policy remains in effect for as long as you or your heirs own the property, providing long-term protection.
While the cost of title insurance may vary based on the property’s value and location, it is a relatively small expense compared to the potential financial losses from title defects. Considering the substantial investment in purchasing property, title insurance is a cost-effective way to protect your financial interests.
As one of the leading property law firms, Melbourne’s Robert Wood and Associates can help with all your property law and conveyancing matters. Whether you’re buying or selling, we are the conveyancing lawyers Melbourne can rely on for expert legal assistance regarding any property transfer.
