Defective or uncertain title
A historic defect, missing evidence or uncertainty affecting ownership or the lender's security.
Independent property finance guide
Title insurance for bridging loans
Understand what title insurance does, the property risks it may cover and why a bridging lender might use it to support a transaction.
- Written for borrowers and brokers
- UK property finance
- Cover depends on the policy
The protection
What is title insurance?
Title insurance is a form of indemnity insurance. It protects an insured party against financial loss arising from a specific legal risk affecting a property title.
Unlike buildings insurance, it is usually concerned with an existing or historic title issue rather than physical damage that may happen in the future.
The policy does not normally remove the defect. It transfers defined financial risk to the insurer, subject to the policy wording, exclusions, conditions and insured limit.
Potential uses
Property title risks that may be insured
Missing deeds or documents
Documents referred to by the title may be missing, incomplete or unavailable.
Restrictive covenants
A past or proposed use may breach a restriction affecting the property.
Rights and access
The title may not contain adequate rights of access, drainage, services or support.
Planning and building regulation issues
Works or use may lack evidence of a required consent or approval.
Search related risks
A transaction may proceed without complete searches where the lender accepts an appropriate policy.
Fraud, forgery or ownership issues
A hidden historic problem may call ownership or the validity of a document into question.
Insolvency related risks
A previous transfer or gift may face a challenge in defined insolvency circumstances.
Absent landlord or freeholder
Necessary consent or information may be unavailable because a relevant party cannot be found.
The critical rule
Cover is defined by the policy, not the policy name
Two title insurance policies may protect against different events. The parties must check the insured risk, exclusions, conditions, limit of indemnity, insured parties and duration of cover. A general description of title insurance is never a substitute for reading the actual wording.
How it works
The title insurance process
- 01A legal risk is identified
The conveyancing solicitor discovers a defect, missing document, absent search or another issue affecting the property title.
- 02The available solutions are considered
The issue may be corrected, investigated further, accepted, insured or treated as unacceptable.
- 03Information is submitted to an insurer
The insurer reviews the title, transaction, known facts, valuation and proposed insured amount.
- 04Terms are offered
The quotation sets out the premium, insured risk, parties protected, exclusions, conditions and limit of cover.
- 05The lender decides whether to accept it
The lender and its solicitor decide whether the policy provides adequate protection for the proposed loan.
- 06The policy is put on risk
The premium is paid and the policy begins in accordance with its stated terms, often on completion.
Who is insured
Lender cover and owner cover
Lender title insurance
A lender policy protects the lender's insured interest in the property. Depending on the wording, cover may respond where a specified title problem causes loss, affects the security or creates legal costs.
Owner title insurance
An owner or purchaser policy protects the insured owner's interest. It may cover different losses and continue on a different basis from lender cover.
A lender policy does not automatically protect the borrower.
The schedule and definitions must identify who is insured. Borrowers should not assume that paying the premium gives them the right to claim.
Financial protection
What might a valid claim pay for?
Depending on the policy, a covered claim may include:
- Loss in the property's value caused by the insured risk
- Legal costs of defending a covered claim
- The cost of reaching an approved settlement
- Payments required to protect the insured interest
- Loss suffered by a lender following enforcement
- Other remedies specifically stated in the policy
Payment is normally limited by the insured amount and the detailed policy terms. The insurer may choose how a claim is defended, resolved or settled.
Limits and exclusions
What title insurance does not do
- It does not repair a physical defect in the building
- It does not guarantee the property's market value
- It does not guarantee planning permission
- It does not ensure the borrower can repay the loan
- It does not make every title acceptable to every lender
- It does not cover risks outside the policy wording
- It may not cover matters known but not disclosed
- It may exclude loss caused by the insured party
- It does not replace independent legal advice
A policy may also restrict contact with a third party connected to the defect. Approaching that party without the insurer's approval could prejudice or invalidate cover.
Important distinction
Insurance does not cure the underlying problem
A missing right, breached covenant or planning irregularity may still exist after the policy is issued. Title insurance provides agreed financial protection if the insured risk causes a covered loss. It does not rewrite the title or guarantee that no dispute will arise.
Bridging finance
Why might a bridging lender use title insurance?
Bridging transactions often work to fixed or urgent completion dates. Where a legal issue cannot be resolved within the available time, appropriate insurance may help the lender decide whether the residual risk is acceptable.
Examples may include a delayed search, missing deed, absent consent, restrictive covenant or uncertainty over a right benefiting the property.
Title insurance should support a considered lending decision. It should not be used to conceal information or bypass a problem the lender would regard as fundamental.
Search protection
Search insurance and defect insurance are different
Search insurance may protect against loss caused by matters that would have been revealed by searches which were unavailable or not obtained.
Defect insurance relates to a known title issue such as a missing easement, restrictive covenant or absent legal document.
The scope, evidence and underwriting requirements differ. A policy covering missing searches does not automatically insure a known title defect.
Premium and cover
How much does title insurance cost?
Title insurance is commonly purchased with a single premium rather than an annual payment. The cost depends on the risk, property, transaction, insured amount, duration and breadth of cover.
The insured amount may reflect the property value, purchase price, loan exposure or another agreed figure. Some policies allow the limit to increase over time but this must be confirmed in the wording.
The solicitor should confirm who pays the premium and whether the cost includes Insurance Premium Tax and any administration charge.
Making a claim
What happens if the insured risk arises?
The insured party should notify the insurer promptly and follow the claims procedure in the policy.
- Do not admit liability
- Do not agree a settlement
- Do not contact an interested third party without advice
- Preserve letters, notices and supporting evidence
- Send the insurer relevant documents promptly
- Follow reasonable instructions from the insurer
The insurer will assess whether the event falls within the insured risk and whether the policy conditions have been met.
Questions to ask
Check the policy before completion
- What precise title risk is insured?
- Who is named or defined as an insured party?
- What is the limit of indemnity?
- Which exclusions and conditions apply?
- When does cover start and end?
- Can the policy benefit a future lender or owner?
- What actions could invalidate the policy?
- How must a potential claim be reported?
Insurance information
This guide is not legal or insurance advice
Policy wording and property risks vary. Borrowers, lenders and property owners should obtain advice from suitably qualified legal and insurance professionals before relying on title insurance.
Common questions
Title insurance FAQs
What does title insurance do?+
It provides financial protection against specific property title risks stated in the policy. Subject to the wording, it may cover loss, legal costs or action needed to defend a covered claim.
Does title insurance fix a title defect?+
No. The underlying defect usually remains. The policy transfers defined financial risk to the insurer rather than correcting the title itself.
Can title insurance replace property searches?+
Only where the lender and its solicitor accept a suitable search insurance policy. It does not automatically replace every search or all legal due diligence.
Who is protected by a lender title insurance policy?+
A lender policy protects the lender's insured interest. It does not automatically protect the borrower or property owner unless they are also an insured party under the policy.
How much does title insurance cost?+
It is often purchased for a single premium. The price depends on the risk, property, transaction, insured amount and policy terms.
Who decides whether title insurance is acceptable?+
The bridging lender decides whether it will accept insurance for a particular risk, normally after advice from its solicitor and consideration of the proposed policy wording.
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