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Property insurance might not always be reliable against title fraud

Is Property Insurance Reliable Against Title Fraud?  


January 22, 2024

UK insurers play a critical role in protecting the interests of both buyers and sellers from title fraud and identity impersonation, offering a wide range of insurance policies. However, the question that looms large is whether your insurance can effectively shield you against the growing threat of property fraud. In this article, we will explore the impact of property fraud on insurers and the resulting reach of their services, shedding light on the challenges and complexities property owners must face daily.

Title Fraud: What You Need to Know



Title fraud, also known as property or deed fraud, is a sophisticated scheme that involves the fraudulent manipulation of property ownership records, allowing criminals to gain unauthorised access to a property's title through deception. Once fraudsters manage to gain control over these titles, it becomes shockingly easy for them to exploit the situation for their own gain, either by selling the properties to third parties or by securing mortgages.


In both these scenarios, fraudsters then proceed to vanish with the ill-gotten money, often stashing it in offshore bank accounts and using fake IDs that make them untraceable to both victims and authorities - as happened in this case.


The consequences of title fraud are profound, affecting not only property owners but also buyers and anyone involved in real estate transactions, knowingly or unknowingly.




What Property Insurance CAN Do



The influence of insurance over property transactions is both crucial and fragile: when it comes to property transactions, insurers have a multifaceted role, offering a range of policies that provide a safety net for financial protection – up to a certain threshold.  


These insurance policies include building and mortgage insurance, both play a pivotal role in ensuring smooth and secure real estate transactions.




Building Insurance


Building insurance, commonly referred to as home insurance, offers coverage for the structure of a property against a range of risks. This includes protection against damage caused by natural disasters, fire, theft, vandalism, and more. It provides homeowners with peace of mind, ensuring that their most significant asset is financially safeguarded.


Despite not always being used, building insurance certainly represents a must have for any conscious property owners who wants to be ready in case unforeseen events happen – acting before things might start going downhill.



Mortgage Insurance


Mortgage insurance, on the other hand, is primarily designed to protect lenders in the event of a borrower defaulting on their mortgage payments. This insurance policy ensures that lenders can recover their investment in cases where a borrower faces financial challenges and is unable to meet their mortgage repayment obligations.



While this is not an extremely common occurrence, in this case a lot of money is usually at stake and being prepared for worst case scenarios is the best attitude to stay safe and secure your money.

Read here to know more about title frauds and credit scores.



How Insurance Can Mitigate Title Fraud


While insurance, in the form of either building or mortgage insurance, can provide financial protection for homeowners and lenders, its effectiveness in mitigating the risks associated with title fraud has certain limitations.


Nonetheless, Insurance can play a role in combating certain specific aspects of title fraud:


1. Coverage against losses: building insurance can provide coverage in cases where a property owner suffers financial losses due to title fraud. This can ensure partial financial relief, especially when dealing with the aftermath of fraudulent property transactions.


2. Reimbursement for lenders: mortgage insurance can assist lenders in recovering their financial stake in cases where borrowers default due to fraudulent activities. It helps mitigate the impact of title fraud on lenders.


3. Legal support: insurance policies may offer legal support and coverage for legal expenses incurred in cases related to title fraud. This can be valuable when legal disputes arise, both to lenders and property owners.



What Insurance CAN'T Do


As we have anticipated, property insurance suffers from a series of structural limitations when dealing with title fraud that ultimately hinders its overall effectiveness against these types of fraudulent schemes.


Let’s review in detail all the cases in which title insurance is just not enough to stop fraudsters and prevent critical losses.



1. It fails to prevent title fraud: insurance policies do not prevent title fraud from occurring in the first place. They primarily offer financial protection after the fact, yet title fraud is best faced before it takes place, rather than afterwards.


2. It cannot detect fraud in real-time: insurance does not actively detect or prevent fraudulent property transactions. It steps in once the fraud has been discovered, without offering any means to monitor and control suspicious activities regarding property titles.


3. It is unable to recover all losses: insurance policies often come with predetermined coverage limits, and property owners or lenders may not recover the full extent of their losses. This is especially troubling, considering that title frauds are hardly concerned with modest sums of money.


4. It does not eliminate the emotional toll: naturally, insurance cannot eliminate the emotional distress and turmoil that property owners and lenders experience when they fall victim to title fraud. The psychological impact is often substantial and shouldn’t be underestimated, especially in case first-time buyers and homeowners are targeted.


4. It is not suited to address all legal complexities: while insurance may offer some legal support, the intricacies of legal disputes related to title fraud can be protracted and complex. Due to this, victims are often left on their own in the long-term, having to deal with the financial and legal aftermath of title fraud without much needed guidance.




Introducing Title Guardian


Overall, insurance plays a critical role in protecting property owners and lenders from the financial fallout of title fraud. It provides coverage against losses, offers reimbursement for lenders, and can partially assist with legal expenses.


However, it is not a proactive measure to prevent title fraud, nor does it address all the complexities and distress associated with fraudulent property transactions.


If you want to avoid the need of constant scrutiny of your properties and bank accounts, without becoming the next in line to be a victim of identity impersonation and property fraud, perhaps it is time to introduce you to Title Guardian.


Title Guardian offers the easiest-to-use and most secure digital monitoring system for your properties, ensuring comprehensive immunity against title fraud and identity impersonation.


Downloading our official app, registered members can access a suite of advanced anti-fraud property and identity monitoring tools, able to ensure constant vigilance over any number of properties at once.


Insurance is good, prevention is better.


Checking both online and offline sources, we can spot any signs of your properties being put up for sale, used for rentals without your knowledge, involved in sketchy mortgage deals, connected with companies you're not aware of, or facing changes in the Title Register through the HM Land Registry.


Remain one step ahead of fraudsters with Title Guardian: start right now by scheduling a call.