Is there title insurance for automobile purchases?


Yes, there are title insurance products that cover automobile purchases, particularly the used or second hand ones.

Title insurance for cars is a fairly new product and has been in the market for only a few years. This product is based on the concept of protecting a buyer of a used car from financial losses because the buyer was not able to make a more informed decision due to a defect in the vehicle-history report.

Similar to title insurance for real estate property, vehicle title insurance protects the insured against financial losses he may incur due to:

  • Fraud in the transfer of vehicle ownership or in the transfer of the title (such as title washing or odometer rollbacks)
  • Inaccurate information given as to the vehicle's title history. This includes any information about the title, as well as data provided by motor vehicle departments.
  • Change in the seller's marital status, which is not reflected in the title of the car
  • Legal expenses to defend against liens attached to the vehicle or against ownership claims from other parties
  • Frame damage or water damage or any other damage that turns the automobile into being declared a "lemon". Commonly, the information did not show in any AutoCheck report, or a vehicle-history report provided by the state's Department of Motor Vehicles.
  • Errors or delays in updating the vehicle-history report

Usually the title insurance also comes with a vehicle history report, similar to a title commitment provided for real estate properties. The policy covers the title until such a time that the owner decides to sell it or to transfer the title to another party.

If you are buying a car that does not qualify for a certified pre-owned vehicle program given by the car manufacturer, we recommend that you get title insurance for the car you are planning to buy. You should also consider buying title insurance if the car you are buying has come from a different state, particularly a state that is known to be flood prone.

The insurance cover, however, does not protect against inaccuracies on information provided by car auctions, as it is hard to check the accuracy of the information given.

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