What Does Title Insurance Cover?
Title insurance can provide extra protection and assistance when it comes to certain property ownership risks. But what does title insurance cover, exactly?
This type of insurance is notably different to home insurance coverage, contents insurance and landlord insurance, because it addresses different risks. Title insurance offers protection for particular liabilities relating to boundary disputes, property titles, surprise property charges and more. Keep reading to explore what’s typically included.
Take note: coverage depends on the property type
When assessing what title insurance is and what title insurance covers, it’s worth noting that coverage depends on:
- Your type of property, and
- Whether you're about to buy or you already own the property.
This is because different property types and needs can have different risks associated with them. So residential title insurance will be best if you’re in the process of buying, but if you already own your property then title insurance for existing owners could be ideal.
There’s also specific cover for different types of property:
- Strata title insurance can provide protection in scenarios that are unique to strata properties, such as the discovery of unknown and outstanding special levy fees.
- Commercial title insurance can provide support for risks specific to commercial property that could affect your use of that property, such as competing interest claims and legal right of access.
- Rural-residential title insurance provides cover for larger residential properties and some of the property ownership risks that these properties can entail.
- Vacant land title insurance is specifically designed for vacant properties, and certain issues that can arise with empty blocks.
Title insurance: what does it cover generally?
So we know title insurance policies can differ – but what does title insurance generally cover? While it’s always important to check the policy documentation and be aware of caps and exclusions, here are some of the risks that are typically considered.
Unapproved works can include structures or additions to a property that were added without the required permit. Unapproved works could include carports, sheds, or gazebos that were built by a previous owner without the relevant council approval.
If you didn’t know about these illegal works before purchasing – but are later required to amend or demolish them by the relevant authority – title insurance could provide valuable financial assistance. After all, who wants to shell out thousands or even tens of thousands of dollars because of someone else’s poor choices?
Incorrect boundaries and encroachment
Incorrect boundaries and boundary encroachments are a common source of neighbour disputes. Sometimes a garage wall might have been accidentally built across the boundary line, or in other cases the property boundary might have been deliberately ignored as a fence was put up. Boundary encroachment can stop property owners from using parts of their own property. On a rural-residential property, an incorrectly placed fence could mean missing out on large sections of useful land.
A request to rectify a boundary encroachment issue can be very costly. If someone else builds a structure or fence which encroaches onto your property without your knowledge or consent, or if a structure you acquire encroaches onto a neighbouring property, then title insurance could assist with these costs. At First Title we can provide this cover for properties up to 50 acres.
Unpaid taxes, fines and undisclosed fees
Nobody likes unexpected bills in the mail, but from time to time some property owners receive letters requiring unpaid fees, fines, land taxes or charges that the previous owner didn’t pay. In a strata property, this could also include unpaid levies. While thorough due diligence and a reputable conveyancer can help to minimise the risk of this happening, unpaid debts can still pop up.
If you happen to find yourself on the hook for a previously undisclosed cost from a past property owner, you could apply through your title insurance policy to have these costs covered.
Scam activity in Australia is on the rise, with fraud accounting for 27% of reports to the Australian Cyber Security Centre in 2022. Some of the costliest scams can include property or mortgage fraud. Scammers might take out fraudulent mortgages against a property that isn’t theirs or claim a property as part of identity theft. This could even result in a property being sold to another owner.
Title insurance can provide cover and assistance if someone else obtains an interest in the insured property through impersonation, duress, incapacity or incompetence. As such, a one-off title insurance premium can provide some peace of mind while buying and owning a property.
Conveyancer and inspection errors
Conveyancers and local authorities, just like all of us, can make mistakes, and important details can slip through the cracks from time to time. The thing is, sometimes these oversights can cost a property owner greatly through undisclosed charges, requirements or restrictions. For example, imagine finding out after you’ve purchased a home that its Public Record was incorrect, and that the property actually has heritage listing; or that the government has a right to acquire all or part of your property under compulsory land acquisition. Not ideal!
Errors by specialists and authorities shouldn’t cost you as the property owner – but with title insurance, you could gain cover for these types of situations.
Looking for more information? We're here to help
Title insurance can cover a wide range of property ownership risks, but you’re no doubt curious how it might apply for your property. We’d be happy to talk you through the details with no obligation or pressure. Simply get in touch with your questions today, or get a quick quote with First Title.
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