What is Title Insurance?
Title Insurance is issued by an insurance company and guarantees that the title to a parcel of real property is clear of any defects.
It provides insurance against loss from flaws in the property title. Should any inaccuracy be detected on the title, the insurance company will be bound to cover the loss incurred by the new title holder or insured lender or must take steps to correct the problem.
Although a Title Insurance Policy is a type of guarantee, it only provides for resolution (by reimbursement or otherwise) if the title is not as stated in the policy. The amount recoverable can never exceed the policy amount.
In this regard, Title Insurance is no different from other types of insurance. It will defend against a lawsuit attacking the title as it is insured, or reimburse the insured party for the actual monetary loss incurred, up to the dollar amount of coverage provided by the policy.
There are two types of title insurance–Owner’s Title Insurance and Lenders Title Insurance, also called a Loan Policy.
Title Insurance was created in the United States and is now available in many other countries, such as Canada, Australia, United Kingdom, Mexico, New Zealand, China and Korea, as well as throughout Europe.
Title Insurance Stakeholders
Owner’s Title Insurance, to the value of the real estate covered, is purchased for a one-time fee on closure of the sale, and lasts as long as you or your heirs have an interest in the property. Owner’s Title Insurance fully protects the buyer should a problem arise with the title that was not uncovered during the title search, and pays for any legal fees involved in defending a claim to your title.
In Jamaica, there are two systems of ownership. There is the title registration system and the deed ownership system, also called common law title.
Unlike the registered title, the deed system offers no government guarantees, so financial institutions will not issue a mortgage or accept it. Title Insurance will guarantee a deed, thereby facilitating the issuing of loan funds.
There are about 730,000 parcels of land in Jamaica and, according to government data, only 440,000, or just over 60 per cent, are registered, leaving nearly 300,000 parcels of land island-wide without titles.
Title Insurance covers both properties with titles and those without, so a whole new class of borrowers can now benefit.
At the same time, borrowers can take advantage of the accelerated loan transaction process.
A Loan Policy is usually based on the dollar amount of the loan and protects the lender’s interests in the property against any deficiencies on the title. The policy coverage decreases each year and disappears as the loan is paid off.
Title Insurance can be used to reduce the timeframe for conveyance transactions as it allows for a more streamlined process that is consistent across practitioners and properties. This would facilitate the introduction of standard practices from as early as the sales agreement stage.
The integrated system also helps lenders protect themselves against fraud and inflated values by ensuring complete quality control throughout the loan process.
With the introduction of improved provisions, lenders should be able to expand their client base and to penetrate a new segment of the market, particularly with regard to common law titles.
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