How does title insurance work

Title insurance is part of the general insurance class, intended to cover both the expenses with the judicial procedure, as well as those regarding the recovery of the damage suffered by the insured through a civil or criminal process, or in the case of a complaint against him. In other words, the insurance of the title of property consists in the conclusion of an insurance policy by which the insured transfers, in exchange for a sum of money, the risks related to the defects of the form or substance of the title or property, in charge of an insurer.

The title insurance policy mechanism

At the date concluding the contract, the insurer issues an insurance policy whose beneficiary is either the owner of the building or the bank, upon its express request in the situation of purchasing the immovable property through a bank credit agreement.
In case of any problems related to the title of property of the building, the issuer of the policy pays all the taxes, costs and expenses of the judicial procedures related to the defense of the property right, including stamp fees, expertise, lawyer’s fees etc. It should be mentioned that carrying out the legal procedures for the defense of the title of property (and indirectly of the property right) is mandatory. In the situation where, despite the due diligence, the title of property is canceled and the property right is lost, the insurer will reimburse the beneficiary of the policy with the amount provided in the policy, which is usually at the level of the purchase price of the building, with any indexation.

Risks insured

The list of risks that can lead to the termination of property title and which are covered by this insurance differs from one insurer to another, including but not limited to: requests for retrocession, non-compliance of the title with laws in force at the time of its conclusion, problems related to the construction authorization, lack of access to the building, falsification of documents, fraud etc. Also, there are insurers who conclude policies for the so-called “known risks”, when the defects of the title or the general insurance of the title are known – in which case all the risks that may occur are considered.
If most insurances are contracts that compensate you in case of specific risks that may happen in the future, title insurance covers risks that could arise due to problems generated by pre-existing causes that you didn’t know about when purchasing the property.