Title insurance protects an owner’s legal right to own and use their property. Lenders usually require title insurance when you take out a mortgage on a property. In this article, we will discuss is title insurance a waste of money in Australia and help you decide if it is right for you!
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:
- 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.
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.
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.
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.
Recommended Reading: What Happens When You Pay Off Your Mortgage in Australia?
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.
To sum up, it’s a good idea to seek legal or conveyancing advice to see whether is title insurance a waste of money in Australia or if it is appropriate for you. Additionally, you should read through the policy documents and product disclosure statements to stay informed about what will and will not be covered if you purchase title insurance.
1. How is title insurance different from other insurance?
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 generally seen as a wise and cheap investment.