What is title insurance?
Title insurance helps protect home buyers and existing home owners against financial loss, including legal fees and remediation costs, if an issue with the title of their home emerges. These issues can include:
- A lien (a creditor’s right to claim the home if the borrower fails to pay their debt) or a debt on the property
- A competing ownership claim for the property
- A non-compliant structure or unapproved renovation on the property
- An error with boundaries that leads to a zoning issue or dispute
- Fraud or identity theft
How does title insurance work?
Title insurance is an insurance policy that you pay for once (typically when you buy a property) that covers you for the duration of time you own the property. The cost of it will vary depending on the property you’re buying and if you make a claim, you won’t need to pay an excess.
When you purchase a home or any new property in Australia, it comes with a title, which is a document confirming your legal ownership of said property, as well as other important information.
During the purchasing process, it’s typical to engage the services of a conveyancer or solicitor. Once the contract of sale is in motion, they will normally undertake a number of searches, often including:
- A title search and check to make sure there are no competing ownership claims, easements, or covenants on the property
- A land tax clearance search to check if any property tax is still owed by the seller
- A main roads search to reveal if the government plans to build transport infrastructure (like a railway or highway) nearby which could impact your ownership of part or all of a property
- A council rates search, ensuring that rates have been paid
An issue may arise in one of these areas, but some problems will not be obvious when purchasing a property.
For example, if a previous owner has undertaken renovations without council approval, this may come to light years or months after purchasing the home.
Fixing such issues could prove to be a significant expense, especially if the council serves you with a notice to bring the property into compliance.
Having title insurance could protect you from the cost of dealing with situations like this.
How is title insurance different from home and contents insurance?
Title insurance differs from standard home and contents insurance in a number of ways.
Home and contents insurance can protect the physical structure of your dwelling and your possessions from insured events, such as damage to your property by a fire or a flood.
On the other hand, title insurance can protect you from claims against the property title itself. These can be anything from notices to remedy non-compliant building works through to a previous owner’s unpaid rates.
Whereas home and contents insurance policies require owners to pay ongoing premiums each year, title insurance tends to be a one-off payment.
What does title insurance cover?
Title insurance can cover homebuyers and existing homeowners against the financial impact of such things as:
- Illegal or non-compliant building works discovered on the property, including structures built or renovations undertaken by previous owners without council approval
- Errors made by local councils or conveyancing practitioners in reporting certain charges, such as outstanding rates and land taxes due to past underquoting
- Compulsory land acquisitions by the government, if before you purchased the property and without your knowledge, the government announced its intent to acquire all or some of it
- Incorrect public records for heritage issues, easements, drainage and sewerage issues
- Boundary errors and encroachments
- Someone else claiming interest or rights in the property via a mortgage, court order, easement, lease, contract, right of possession, or access rights
- Someone else lodging a right or interest in the title of the property that prevents you from becoming the registered owner
- Another person’s fraud or forgery
- Improper signing or registration of documents
- Lack of legal right of access to the property by foot or vehicle
- Lack of legal water supply or drainage to the property
- Restrictive covenant, restrictions or easements that do not appear in public records and limit your use of the property
- Zoning violations that prevent you from using the property as your home
- Violations of subdivision law, meaning an error occurred when your home was made into its own parcel of land
However, these features may vary between title insurance policies and insurers.
What does title insurance not cover?
What is excluded will vary from policy to policy. Here’s a general list of exclusions you can expect to see:
- Risks or issues the buyer was aware of before settlement
- Risks that don’t result in a financial loss
- Damage from bad repairs, pests, normal use, or old age that could’ve been found in a pre-purchased building inspection report
- Buildings not in compliance with the Building Code of Australia
- Losses from environmental contamination
How much does title insurance cost?
Currently, there are only two insurance providers who offer title insurance in Australia—First Title and Stewart Title Limited.
Title insurance is paid for via a one-off payment, and the amount of this varies according to the location and price of the property.
According to the Stewart Title Premium Schedule (at the time of writing), premiums for a residential property in NSW, QLD and VIC for a home valued at $750,000 are as follows:
- Cost of title insurance in NSW: $719.50
- Cost of title insurance in QLD: $719.50
- Cost of title insurance in VIC: $726.10
For example, according to the Stewart Title Premium Schedule at the time of writing, the premium for a residential property in Queensland valued at $750,000 would be $719.50, while a property of the same value in the Australian Capital Territory (ACT) would cost $660.09.
If you’re seeking a quote for your own property, it’s advisable to contact an insurance provider directly to arrange one.
How long does title insurance last?
Unlike other forms of insurance, title insurance does not expire and will continue to protect the property owner and their beneficiaries (if the property title is transferred) until the property is sold to someone else.
Can you get title insurance if you already own your home?
Yes, you can often take out a title insurance policy if you already own your home. Maximum terms and conditions may apply, so it’s worth checking the PDS and other policy documentation before purchasing.
What are the different types of title insurance?
You can often get title insurance for the following property types:
- Residential property
- Strata property
- New commercial property (title insurance may not be available to existing commercial property owners)
- Vacant land
Is title insurance worth it?
The fact that title insurance is a one-off payment rather than an ongoing cost may make it appealing to some prospective home-buyers or current homeowners. But whether it’s worth it will come down to your individual circumstances.
If you’re pondering whether or not to take out a title insurance policy, it may be worth consulting your solicitor or conveyancer to ask if the protection is suitable for you.
It may also be worthwhile to consult the relevant policy documents and PDS to find out exactly what you will be covered for and what’s excluded if you take out title insurance.
Whether or not you take out title insurance, it’s generally still a good idea to get a separate home and contents insurance policy to cover the risk of damage to your property or possessions.
You can compare home and contents insurance products offered by Canstar’s panel of providers.
