A specialist insurance company is encouraging brokers to discuss title insurance with their clients to protect them against losses incurred due to pre-existing title and property related defects.
Paul Watkins, general counsel member, Australia at Stewart Title Limited told Australian Broker that there is often a misconception in the market place about title insurance.
“Title insurance in Australia caters to two markets – lenders and homebuyers. While brokers are often more familiar with lenders title insurance, as it forms part of the costs disclosure statement in a loan contract, it does not insure the homebuyer. The homebuyer needs to take out their own insurance policy to protect themselves.”
Much like LMI versus loan protection insurance, one protects the lender and one protects the purchaser – but both are different and important, Watkins said.
Title insurance policies for residential lenders indemnifies lenders in the event a loan goes into default and there is a loss in relation to covered risks on realisation of the security. These policies are specifically designed to cover lenders and protect them from the risks arising out of the validity and enforceability of a mortgage.
Title insurance policies for homebuyers protects against loss incurred as a result of title defects or adverse matters relating to title to the land. This policy will protect buyers from loss incurred as a result of conduct by the previous owner such as illegal building work, encroachments and outstanding rates and taxes. A title insurance policy designed for home buyers also protects the home buyer in the event of fraud, forgery or mistake that leads to another person being registered as the owner of the land.
According to Watkins, in NSW there is nearly a 30% chance that the previous owner has done work without approval and 80% of the claims made to Stewart Title come from unapproved building works. This is particularly relevant in an increasingly DIY culture.
Typically, lawyers and conveyancers will promote title insurance for homebuyers, but Watkins is encouraging brokers to have this discussion with clients too.
“Brokers always want the best for their clients and they are trusted by their clients, so this is another way brokers can ensure their clients are educated and protected. We encourage brokers to recommend that their client speak to their conveyancer or lawyer about a title insurance policy that is designed to protect borrowers and may be suitable for their circumstances.”
Unlike other insurance premiums which are paid monthly or annually, title insurance is a one-off payment at the time of purchase. The cost is calculated on a sliding scale, based on the purchase price of the property. The average premium for NSW, insured under Stewart Title, is $363.
