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title insurance

IRDAI has vide its circular dated 8th September, 2021 recommended to general insurance companies to consider providing title insurance policies to real estate developers and promoters and also home buyers to mitigate the loss, if any due to bad or defective title to the property.

https://irdai.gov.in/ADMINCMS/cms/Circulars_Layout.aspx?page=PageNo4558

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.

2.    There are a few Title Insurance products in the Indian marketcurrently. However, considering the requirements of legal protection for promotors in the early stages of development of the project during financial appraisal, registration and approval with RERA authorities and safeguarding the interests of individual buyers after taking over the physical possession of property, there is aneed to expand the current title insurance products suitable to promotors/ developers and retail property buyers.

3.    In order to ensure that the general insurers offer basic Title Insurance covers for legal liabilities of promotors/developers in case of any loss caused to allottees duetodefective title of the property, protection for individual buyers for the purchased units in projects and to facilitate easy marketability of these products, the Authority had constituted a Working Group to suggest, inter alia, product construct and policy wording for two new products in addition to the existing products.

4.    Accordingly, the Working Group hassuggested product structure, coverage and policy wordings for the following products.

(a)  Promoter Legal Expenses (Defence Cost) Policy: This cover will indemnify the insured against legal defence costs only against suits challenging the Title of the project.

(b)  Allottee/Individual Buyer Retail Policy: This cover is designed to indemnify the insured against loss from a defect on title of property. The policy may be opted by the individual buyer and financiers of the property at the time of the possession.

The policy wordings developed by the Working Group for the above products are given in the Annexure.

5.    The main objectives of new Title Insurance products are to provide cover to;

(a)  promoters/developers, preferring to optfor a minimum legal defence cost;

(b)  end usersi.e., allottees/individual buyers/financiersat the time of possession/handing over of the property unit for protection against any legal suits in future.

6.    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 filesimilar 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 ofpromoters/developers and retail property buyers.

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