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Title insurance is a form of indemnity insurance that protects a potential owner of a property against financial loss from defects in title to real property

While buying a property one of the biggest concerns on the mind of a buyer are relating to title disputes. This is because several incidents have been noticed in the past where buyers suffered because of disputed properties being sold even after their due diligence. To mitigate such risks, the Insurance Regulatory and Development Authority of India has suggested a model structure for title insurance policies. There are already a few title insurance products in the market currently. However, now individual buyers and financiers of the property can take it out at the time of possession.

Title insurance is a form of indemnity insurance that protects a potential owner of a property against financial loss from defects in title to real property. The policy is a retrospective one where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy.

“Title insurance in India is at a nascent stage. I feel that IRDAI’s circular on the same will help increase its acceptance in the country. Currently, this product is available only for promoters/developers in Indian market, in this circular the regulator has suggested to introduce a retail policy for allottee/individual buyer. Individual buyer and financiers of the property can opt for it at the time of the possession and they can be indemnified from a defect on title of the property,” said TA Ramalingam, Chief Technical Officer, Bajaj Allianz General Insurance.

The IRDAI’s working group has suggested two products. First is the promoter legal expenses policy, which will indemnify the insured against legal defence costs only against suits challenging the title of the project. The second is individual buyer retail policy which is designed to indemnify the insured against loss from a defect on the title of the property. The policy may be opted by the individual buyer and financiers of the property at the time of possession.

“IRDAI has recommended introducing Promoter Legal Expense (defence cost) Policy. As of now, the existing products in the market provide title insurance for the entire project duration. With this, customers can opt for the policy duration as per their requirement,” said Ramalingam.

“All general insurers are, therefore, encouraged to file these products as per the procedure required under the extant product filling guidelines. The insurers may also design and file similar products, keeping in view the minimum coverage as specified in the given policy wording. The filing of the said product/s may be carried out at the earliest to respond to the requirements of promoters/developers and retail property buyers,” the insurance regulator stated in a circular.