What is Title Insurance?

So what is Title Insurance exactly? A property title is the legal proof of ownership of a property. The title lists what rights to the land there are and limitations that may be applicable. On this title, it will list an official record of the legal owner’s names, mention registered mortgages associated with the title, document liens, describe easements and other details of importance. If for some reason there is an error of any kind on this document then you have a situation that could potentially seriously impact your investment for years to come. 

Title Insurance isn’t costly when compared to the average cost of a home. At prices starting typically under $200, Title Insurance for a home worth hundreds of thousands of dollars is definitely worth every bit of protection against a title defect. A major title defect could potentially cost you hundreds of thousands of dollars or minor defects could be thousands. Misrepresentations that are made on a title do happen and protecting such a major investment is worth the additional investment of Title Insurance.

In Canada, if you purchase residential property through a registered mortgage then almost always the lender will require the purchase of Title Insurance. Sometimes there is an option to pay for a land survey but this is almost always the more expensive option when you count all the costs associated with the survey. You might be charged for a lender policy as part of your closing costs regardless and often title insurance companies will offer a blanket policy that includes both buyer and lender coverages for only a small upcharge.

You will want to inquire about the features of the particular policy you are offered by your lawyer and they will be able to share all the details with you. Another factor to bare in mind is the type of mortgage product you have i.e. a collateral mortgage vs. conventional mortgage as can raise your Title Insurance cost. 

Title Insurance is not required but it is definitely worth the additional protection it affords for many potential losses which could end up costing tens of thousands of dollars. It can cover you for things such as fraud, survey errors, encroachment issues, existing undisclosed liens, and any issues that might prevent you from having clear property ownership. Another benefit of Title Insurance is that in the case you need to defend your title, your title insurer will cover the defence cost (your policy will state the maximum amount of defence coverage). 

Many Title Insurers include “building compliance” coverage as a policy rider, which covers you if a property was renovated without proper permits and isn’t in compliance with current building code regulations. This means there is compensation for the cost of correcting any issues and bringing the property up to code but be sure to check what the limits if any on how much they will cover. Protection from identity theft is typically an optional feature to consider and it will cover you for various losses due to identity theft. 

It is possible to buy Title Insurance for a property that you own already but there are different rules as it is not possible to determine pre-existing conditions but it will cover certain things. Mortgage fraud is a real issue and prime targets are homeowners with free and clear titles (ie no mortgages or liens). Fraudsters steal personal information and forge documents to transfer ownership of titles and then take out a mortgage on the property. They quickly disappear never to be seen again with the mortgage money and the title goes to the bank.  

In summary, Title Insurance is inexpensive in comparison to potentially costly issues. Older, homes that have been renovated have the highest number of claims but no matter what type of home or property Title Insurance can cover you as there are many different levels of coverage. At Keystone we can offer a description of what is covered in your Title Insurance policy and what the costs are. Do not buy or make changes to any title insurance policy without first obtaining advice from a lawyer, we can help you make the best decision that will protect you and your investment. 

By Karuna Beckmann