What You Need to Know About Title Insurance

This blog is directly from the Financial Services Commission of Ontario to make sure that the information is accurate and easy to understand. 
 

What is “Title”? 

The word “title” is a legal term that means you have legal ownership of property. You obtain title to property when the owner signs the deed (transfer document) over to you. Title is then registered in the government’s land registration system. 

What is Title Insurance? 

Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership. 

Do I Really Need Title Insurance? 

Title insurance is not a requirement in Ontario. The decision on whether or not you should purchase title insurance should be discussed with your lawyer, title insurance company or insurance agent/broker, to fully understand what type of protection title insurance can provide you, and to determine if other options exist. Once you get all the facts, you can make an informed decision based on your specific situation and needs. It is important to keep in mind that title insurance does not replace legal advice when purchasing property. 

What Does Title Insurance Cover? 

For a onetime fee, called a premium, a title insurance policy may provide protection from such losses as: 

• Unknown title defects (title issues that prevent you from having clear ownership of the property); 

• Existing liens against the property’s title (e.g. the previous owner had unpaid debts from utilities, mortgages, property taxes or condominium charges secured against the property); 

• Encroachment issues (e.g. a structure on your property needs to be removed because it is on your neighbour’s property); 

• Title fraud; 

• Errors in surveys and public records; and 

• Other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future. 

Your title insurance policy will protect you as long as you own your property, and 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. 

What are the Different Types of Title Insurance? 

There are two main types of title insurance policies: 

• Owner’s Policy – Protects the property owner from various title-related losses that are listed in the insurance policy, for as long as the property is owned. An owner’s policy sets a maximum amount of coverage. 

• Lender’s Policy – Protects the lender from losses in the event that the property’s mortgage is invalid or unenforceable. A lender’s policy usually provides coverage for the amount of the property’s mortgage. 

You can purchase title insurance for both residential and commercial properties. 

Types of residential title insurance include: 

• Policies for new homeowners 

• Policies for existing homeowners 

• Policies for lenders in a residential mortgage 
  
  For more information Visit Understanding Title Insurance