What is title insurance?
Title insurance is protection against loss arising from problems connected to the title of your property. It is likely that the property you purchased would have gone through several ownership changes. A weak link at any point in that chain could emerge to cause trouble someday. For example, someone along the way may have forged a signature in transferring title. Title insurance covers the insured party for any claims and legal fees that arise out of such problems.

Prior to purchase, the Land Registry records are "searched" to determine the previous ownership of the property, as well as prior dealings related to it. At closing the buyer expects property that is free and clear of such claims and so they have to be cleared up before purchasing.

Occasionally problems regarding title are not discovered before purchasing, or are not remedied before purchasing. Such defects can make the property less marketable when the buyer subsequently sells and, depending on the nature of the problem, can also cost money to remedy.

Am I required to purchase title insurance?
Title Insurance may be required if you need a mortgage, because mortgage lenders require such protection for an amount equal to the loan. It lasts until the loan is repaid. As with mortgage insurance, it protects the lender but you pay the premium, which is a single-payment made upfront.

Who is protected with title insurance?
Title insurance policies can be issued in favour of a new/resale purchaser, a lender, or both the purchaser and lender. Some of the risks that are frequently covered under a title insurance policy include: survey irregularities; claims due to fraud, forgery or duress; unregistered easements and rights of-way. For a risk to be covered usually it has to have existed as of the date of the policy. As with any type of insurance policy, certain types of risks such as environmental hazards might not be covered. Be sure to discuss with your lawyer what risks are covered and what are excluded.

When does the insurance coverage end?
When the title insurance covers the purchaser it remains in effect as long as the insured purchaser has title to the land. Some policies also protect those who receive title as a result of the purchaser's death or certain family members (e.g., a spouse or children) to whom the property may have been transferred for a nominal consideration.

When the title insurance covers the lender, the policy remains in effect as long as the mortgage remains on title. A lender covered under a title insurance policy is insured in the event the lender realizes on its security and suffers actual loss or damage with respect to a risk covered under the policy. Lenders are usually covered up to the principal amount of the mortgage.

The premium for title insurance is paid once (at the time of purchase). Generally speaking, in Sri Lanka the purchaser of the property pays for the title insurance, though there can be situations where the seller pays for it.

Protection and peace of mind
Title insurance can help ensure that a closing is not delayed due to defects in title. And, if an issue relating to title arises with respect to a risk covered under the policy, the title insurance covers the legal fees and expenses associated with defending the insured's title and pays in the event of loss.