What does Title Insurance cover?

WITH THE RISE OF TITLE FRAUD IN THE MEDIA, THIS FELT LIKE THE RIGHT OPPORTUNITY TO BREAKDOWN WHAT TITLE INSURANCE IS AND HOW IT WORKS.

WHAT IS TITLE INSURANCE?

To answer this, let's start with word "title". In simplest terms, title refers to ownership of the property. And that's exactly what title insurance protects.

Title insurance is a policy that protects the owner or lender of a property from losses due to defects in the title. In other words, if there are any problems with the title of the property you're buying, title insurance will cover you for any resulting costs or damages.

A title insurance policy will cover losses up to the maximum coverage amount and may also cover legal expenses related to defending those title rights. 

What does title insurance cover?

• Unknown title defects 
• Existing liens against the property
• Encroachment issues 
• Title fraud
• Errors in surveys and public records
• Title-related issues that can affect your ability to sell, mortgage, or lease your property
• Legal fees related to defending title rights

What does title insurance NOT cover?

• Known title defects
• Environmental hazards
• Native land claims
• Problems revealed by new surveys after purchase
• Matters not listed in public records
• Zoning by-law violations that you are responsible for
• Damages due to flooding, fire, or sewer backup
• General wear and tear of the property
• Theft
• Losses or damages due to non-­title related issues

HOW MUCH DOES TITLE INSURANCE COST?

The cost of a title insurance policy in Ontario depends on the type of property, the value, the mortgage, and the title insurer.

Premiums are a one-time fee, and typically paid at the time of closing. Title insurance is not a monthly expense.

In Ontario, we have 4 main title insurance companies:

• Title Plus
• First Canadian Title
• Stewart Title
• Chicago Title

While it's impossible to give a simple answer about the cost, here are some example quotes for a resale single-family home with a bank mortgage:

Purchase Price: $500,000 
Title Insurance premium: $442.00

Purchase Price: $750,000
Title Insurance Premium: $712.80

Purchase Price: $1,000,000
Title Insurance Premium: $982.80

These figures are only provided to give you an idea of what a title insurance premium costs. If you want an exact quote for your property, visit the title insurance provider's website or contact your real estate lawyer.

IS TITLE INSURANCE REQUIRED? 

Title insurance isn't technically required. I say technically because while it isn't a requirement on its own, most lenders require a title insurance policy as a condition of the mortgage. Since most purchases include a mortgage, title insurance is usually required.

As a lawyer, I usually recommend title insurance even when it's not mandatory. The one-time cost of the premium provides valuable protection and peace of mind when compared to the substantial cost that title issues could raise. Plus, the insurance policy lasts for as long as you own the property.

If you did not obtain a title insurance policy when you originally purchased your home, you can still purchase a title insurance policy after the fact. 

SUMMARY

• Title insurance protects owners against costly title issues and defects that affect their property rights.
• The cost of title insurance depends on the property type, value, mortgage, and insurer. 
• While not mandatory, lenders typically require title insurance as a condition of the mortgage.
• Speak to your real estate lawyer about how to choose the right title insurance policy for your situation.