Title Insurance – You bought it! But, what is it?

Congratulations on the purchase of your new home! During the closing we briefly discussed your Title Insurance policy, but now that you have a little more time to breath you’d like to know more about it. Well, Title Insurance is an integral, yet often times misunderstood, component of almost every real estate transaction.

Banks and lenders require it in most transactions, and for that reason – People Buy It! But it’s also important to understand what you’ve purchased. Below you will find a brief summary on the ins and outs of a Title Insurance policy.

Title insurance is an insurance policy that protects residential and commercial property owners and their lenders against losses related to the property’s title or ownership. The term “title” is a legal term that refers to the legal ownership of property. Title insurance provides protection from the various potential losses related to your property. These include unknown title defects, existing liens against the property’s title, encroachment issues, title fraud, and other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future. For a one-time fee, called a premium, a title insurance policy will offer protection from such losses. Importantly, title insurance policy will only protect you as long as you own your property. In addition, a title insurance policy will cover losses up to the maximum coverage set out in the policy. It may also cover most legal expenses related to restoring your property’s title.

Before purchasing a title insurance policy, be sure to review the coverage as there are possible exclusions. These include known title defects, environmental hazards, native land claims, zoning bylaw violations, matters that are not listed in public records, problems that would only be discovered by a new survey or inspection of your property, and other additional exclusions.

Given that a title insurance policy does not provide compensation for non-title related issues, it does not provide compensation for damages due to flooding, fire, general wear and tear of your property, theft, and other damages due to non-title related issues.

Title insurance policy provides protection for residential and commercial properties. Residential title insurance policy insures houses, condominiums, rental units, cottages, cooperatives, leased properties, and vacant and rural land. Commercial title insurance policies can insure office buildings, industrial buildings, shopping centers, warehouses, leased commercial properties, vacant commercial land, and rental units.

Residential title insurance can provide coverage for individuals planning to purchase new property, or even if they own a property already. Specifically, the policy can provide comprehensive coverage which offers protection against losses related to the property’s title. Also, it can provide gap coverage which protects you for the “gap” between the time your property purchase is finalized and the time your title is registered in the land registration system. Next, the policy provides survey coverage which eliminates the need for a new up-to-date survey of your property. Finally, the title insurance policy provides legal coverage which offers payment for most legal expenses related to defending your home’s title. Most importantly, title insurance simplifies the closing process for your lawyer, thereby saving your time and money!

Title insurance may be purchased at the time of buying your property, or anytime after the purchase. However, policies for existing homeowners and new property buyers are slightly different. The cost of residential title insurance varies based on the value of your property, and the insurance company you choose. A one-time fee, called a premium, applies to all purchasers.

Residential title insurance coverage lasts as long as you own the property. Most residential title insurance policies extend coverage trough a will, or when the property is transferred from parents to children for nominal consideration.

Title insurance can be purchased through a lawyer or title insurance company. You can also contact an insurance agent for more information.

Once you have decided to purchase title insurance be sure to verify that your property is insured for its full value, that your policy’s effective date is the same as your property’s closing date, and that you understand the terms of your coverage.

Importantly, all real estate lawyers in Ontario are required to carry professional liability insurance and this insurance may provide coverage for title-related issues that relate to the services provided by your lawyer.

In order to make a title insurance claim you must first verify that the title-related problem is covered by the policy. Once it is established that you qualify for protection, ask your title insurance company or refer to your policy to find out when claims must be submitted. Your claim must be submitted in writing specifying the information on the losses you have experienced and must include your policy number, contact information and any relevant documents related to your claim. Finally, it is recommended that you keep a copy of your claim. A decision about your claim will be communicated with you within a reasonable amount of time.