Title insurance: what it actually covers, and what it doesn't

A common, quietly stressful scenario: a house has a structure nobody ever got council approval for
— a family granny flat that's not on any plan, a shed built over a boundary, a pool that was filled
in without a permit. The seller may not even mention it, because it isn't on the certificate of
title and doesn't appear in the contract. If you buy the property, you inherit the legal problem
along with the house — councils can order the work removed or brought up to code, "I didn't know"
isn't a defence, and rectification can run into real money. Title insurance is the product built
specifically to sit behind that risk. This page explains, independently, what it actually covers,
what it doesn't, what it costs, and where it genuinely fits alongside — not instead of — ordinary
property due diligence.

What title insurance actually covers

Based on two named Australian title insurers' own public policy materials — First Title's
consumer-facing coverage summary, and Stewart Title's actual sample Residential Purchaser Policy
document — residential title insurance typically covers a defined list of legal, not physical,
risks: unapproved or illegal building work carried out by a previous owner (a granny flat, deck,
pergola or carport that was never council-approved); boundary encroachments, including a
fence or structure built by a previous owner that extends onto your land, or a structure someone
else builds onto your land without your knowledge; unregistered easements or rights of way
affecting the title that weren't recorded when you bought; fraud, forgery or impersonation
that could affect your title or put a fraudulent mortgage against your property; and errors in
public or council-authority searches conducted at the time of purchase. Coverage details, caps
and specific exceptions vary by insurer and by the individual policy — this is a representative
picture from two providers, not a universal guarantee.

The exclusion that matters most: a defect you already know about

Common mistake: assuming title insurance is a safety net you can buy after finding a problem,
or a general substitute for building and contents insurance. It's neither. Stewart Title's own
sample policy states plainly that it "does not provide Cover in respect of the destruction of or
damage to a building on the Land and is not a home building insurance product, a home contents
insurance product." And critically, for unapproved-building-work cover specifically, the same
policy excludes a defect if a standard local-authority search or a building inspection report the
buyer already obtained would have disclosed it. In practice, that means title insurance protects
against what a thorough search and inspection can't find — not against a defect you've already
uncovered, or chose not to check for. It also generally excludes risks you created, allowed or
agreed to yourself, and risks known to you before the policy started.

What it costs, and how it's structured

Title insurance is typically a one-off premium — paid once, not annually — that lasts for as
long as you own the property; it doesn't automatically transfer to whoever buys the property from
you next. One insurer, First Title, states an average cost of less than $700 for a residential
policy; actual price depends on the insurer, the property and the specific policy, so treat that
as an example, not a quote. It's entirely optional in Australia — there's no legal requirement to
buy it when purchasing a home, unlike, say, compulsory third-party car insurance.

It's a backstop to due diligence, not a replacement for it

Title insurance exists because even careful due diligence has limits: a council search only shows
what's on file, and unapproved work by an owner from decades ago sometimes never made it into any
record at all. But that's precisely why it can't replace the checks themselves — see
Building Notices and Orders in Victoria for how a
registered order binds whoever owns the property next, and Delora's
due diligence guide for the fuller checklist (Section 32, title, planning,
owners corporation, environmental risk) that title insurance sits behind, not in front of. If your
own search or inspection already turned up a specific defect, a title insurance policy taken out
afterwards is very unlikely to cover that same defect — the two tools solve different problems and
work best in the right order: due diligence first, insurance as the backstop for what due diligence
structurally can't reach.

What "title" even looks like now: the shift to electronic titles

One thing worth understanding before you weigh a policy is what the thing being insured physically
is — because in Victoria that changed recently. From 3 August 2024, Land Use Victoria stopped
issuing paper certificates of title altogether. When a transfer is registered after that date,
electronic control of the certificate of title goes to the relevant party — typically the buyer's
lender, or their conveyancer or solicitor through the electronic lodgment network — rather than a
paper document being handed to the buyer at settlement. Paper certificates already on issue stay
valid, but only until the next transaction involving that property, at which point that title too
moves across.

For most buyers this is administratively invisible: you were never going to frame the certificate
anyway, and your conveyancer handles the lodgment either way. It does, however, sharpen why the
fraud limb of a title insurance policy is the one people most often misunderstand. Title insurance
covers fraud, forgery or impersonation affecting the title or a mortgage — and that risk lives
in the registration and identity-verification process, not in a filing cabinet. It is not cover
against someone physically stealing a document. If you are trying to decide whether the fraud
component is worth anything to you, the question to put to your conveyancer is a specific one: what
identity-verification steps are being run on the other side of this transaction, and what happens if
they fail. That is the exposure the policy is actually pricing.

Two related points follow from the structure of the product rather than from any one insurer. Cover
runs for as long as you own the property and does not transfer automatically to whoever buys
it from you next — so it is not an asset you are passing on, and a future buyer weighing the same
question starts from scratch. And because it is a one-off premium with no ongoing annual payments,
the decision is genuinely a one-time one made at purchase, not a subscription you can reassess each
year the way you would with building or contents cover.

Deciding whether it's worth it

This isn't a recommendation either way — that's a decision for you and your conveyancer or
solicitor, informed by your own property's risk profile. Moneysmart (ASIC)'s general insurance
guidance is a reasonable starting discipline even though it doesn't specifically address title
insurance: download and actually read the Product Disclosure Statement rather than a marketing
summary, remember the cheapest policy may not give you the cover you need, and treat comparison
websites with some caution — Moneysmart notes plainly that they "are businesses and may make money
through promoted links" and may not show you every option. A conveyancer who already knows your
specific property's search results and title history is generally better placed than a generic
online comparison to say whether a policy is worth it for that property.

Frequently asked questions

Does title insurance replace a building and pest inspection or a Section 32 review?
No. Title insurance is a backstop for legal/title risks that due diligence can't always uncover —
it isn't a substitute for a building and pest inspection, a Section 32 review, title and planning
searches, or a conveyancer's advice. Skipping those checks because you plan to buy title insurance
would remove the protections it's designed to sit behind.

Will title insurance cover an unapproved structure I already know about?
Generally no. Insurers exclude defects that are already known to the buyer, or that a standard
council search or a building inspection report the buyer obtained would have disclosed. Title
insurance is built to cover what a careful check can't find — not a known problem you're hoping to
insure around.

Is title insurance compulsory when buying a home in Australia?
No. It's optional. There's no legal requirement to purchase it, unlike some other insurance types.
Whether it's worthwhile depends on your specific property, its history and your own risk tolerance
— a question worth raising directly with your conveyancer or solicitor.

Is title insurance the same as home building or contents insurance?
No, and insurers are explicit about this. Title insurance covers legal/title defects — it doesn't
cover physical damage to the building from fire, storm, flood, pests or vandalism. You still need
separate home building and contents insurance for that.

See also: Building Notices and Orders in Victoria ·
the complete due diligence guide ·
Australian property data tools, compared ·
how Delora sources and verifies its content

Delora provides general information, not financial, legal or insurance advice, and doesn't
recommend any specific insurer or policy. Insurance coverage, exclusions and pricing vary by
provider and change over time — read the current Product Disclosure Statement and confirm with a
conveyancer or solicitor before relying on any figure here.