Title insurance is a form of indemnity insurance that protects the potential owner of a property from financial loss from defects in property title. IRDAI issued the title insurance guidelines through a circular on September 08, 2021.
The title insurance cover should be retrospective in nature, IRDAI said. This means that it will cover not only future litigation but also any lapses in the past.
“Title insurance in India is in its infancy. I think the IRDAI circular on this will help in increasing its acceptability in the country. Presently, the product is available only to the promoters/developers in the Indian market,” the regulator said in the circular. It is suggested to introduce a retail policy for the allottee/individual buyer,” says TA Ramalingam, Chief Technical Officer, Bajaj Allianz General Insurance.
There are only a few title insurance products in the Indian market, however, IRDAI in its circular said, “Keeping in view the requirements of legal protection for promoters in the early stages of project development during financial evaluation, registration with RERA authorities and There is a need to expand the existing title insurance products suitable for promoters/developers and retail property buyers, to protect the interests of individual buyers after approval and taking physical possession of the property.
In addition, to provide assistance to promoters or developers to make a legal defense against a title challenge and to indemnify home buyers In case of a defect, the regulator had asked a working group to make suggestions. “In order to ensure that the general insurers provide basic title insurance cover for the legal liabilities of the promoters/developers in case of any loss caused to the allottees due to defective title of the property, In order to facilitate projects and easy marketability of these products, the Authority has been mandated, inter alia, for product formulation and policy wording, to suggest two new products in addition to the existing ones. A working group was formed for
Product Structure, Coverage and Policy Terms as suggested by the Working Group:
Policy 1: Promoter Legal Expense (Defense Cost) Policy: This cover will indemnify the insured against legal defense cost only against litigation challenging the title of the project.
Policy 2; Allottee/Individual Buyer Retail Policy: This cover is designed to indemnify the insured against loss arising out of defect in title to the property. The policy can be selected by the individual buyer and financiers of the property at the time of possession.
“Individual buyers and financiers of the property can opt for this at the time of possession and they can be compensated by a defect on the title of the property. Additionally, IRDAI has recommended the introduction of Promoter Legal Expenses (Defence Cost) Policy, Which compensates against legal defense cost only against litigation challenging the title of the project.As of now, the existing products in the market offer title insurance for the entire project duration.With this, the customer can adjust the policy term as per their requirement. You can choose the option,” says Ramalingam.