So what does title insurance mean?

Title insurance may be a concept that you may be unfamiliar with. But it could soon be something you seek, once First Indian Corporation, a member of the $6.72-billion First American Corporation, makes firm plans of bringing it to India. FIC is looking at introducing FAC products in the Indian market and one of these is title insurance.

So what does title insurance mean? Title insurance basically protects an owner or a lender from problems that may affect title ownership. A title is a document that gives evidence of an individual's ownership of property.

This means that if an individual has title insurance, the title insurance company will protect him/her against any financial loss arising out of any title defect and even defend the owner against it.

So if one has taken title insurance for a property and later there are claims due to which he/she has to revert back the property to another claimant, the title insurance company makes good the financial loss (capped at the amount insured) to the title owner.

So the title insurance protects a person from losses that occurred prior to the date of the policy. Meaning, the coverage ends on the day the policy is issued and it extends backward in time. It does not cover any future event like any other life or general insurance policy.

Title insurance, therefore, can protect an owner or a lender from title defects as in the case of fraud, undisclosed heirs, wills not properly probated, wrong interpretation of wills, confusion due to identical names, errors in the public record and so on.

Besides, forgery, clerical errors in recording legal documents, birth of heirs subsequent to the date of will and incorrect representation of marital status of grantors are other defects that title insurance protects an owner from, based on the risks mentioned in the policy.

Title insurance is a concept that many Indians are not familiar with as at present, there are no companies that provide title insurance in India. In the US, however, it is a popular concept.

"In the US, most of the FAC clients for title insurance are banks and mortgage companies. They buy title insurance on behalf of an individual as it can protect the lender in case of any default in payment by the borrower. Besides, it can help them scrutinise the legal documents and verify them before giving loan or mortgaging the property to the title owner," Anoop Hegde, country manager, First Indian Corporation Pvt Ltd, says, adding that many banks in India too are looking forward to title insurance in India.

So what does a title insurance company do when a bank or mortgage company approaches it for title insurance?

The title insurance company does something called 'Title Search'. This means that the company examines public records and court decisions to verify whether the individual is the real owner of the real estate.

"We check if there are any title defects that have occurred prior to the date of transaction and once we have strong reasons to believe that there are no issues about it, we give title insurance," Hegde explains.

Title insurance is usually taken for an indefinite period. The premium that an owner needs to pay for a title insurance policy is usually a flat percentage on the property value (generally the purchase price) and when it is taken for the purpose of a loan, the percentage is either on the property value or the loan amount, whichever is lesser.

According to sources, the cost of premium varies in across a country as the services that each insurer gives may also be different. For instance, in some places, the premium may include the cost of search and in others it may not.

So is title insurance likely to make its foray in India soon?

"We have spoken with the respective state governments at Andhra Pradesh and Karnataka regarding title insurance. But it was more of an educative process. Launching title insurance in India will depend on many factors, one of it being on whether the government can share with us the property records that are required for title insurance," Hegde said, adding that, however, in the future course of time, they will be looking at introducing the product in India.

FAC has more than 100 years of experience in title insurance. Its other areas of business include mortgage information, screening information and specialty insurance.

Name matters

• Title insurance protects an owner or a lender from problems that may affect title ownership.
• A title is a document that gives evidence of an individual's ownership of property.
• Insurer will protect a person against any financial loss arising out of any title defect and even defend the owner against it
• Title insurance can protect from frauds, undisclosed heirs, wills not properly probated, wrong interpretation of will, confusion owing to identical names and errors in public records