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What Is title insurance & do I need it?

When you purchase a home, you suddenly find yourself swimming in a whole lot of information—property tax, mortgages, lawyer fees, home insurance, etc.  You were expecting many new responsibilities, but all this coming at you at once can feel overwhelming. The last thing you need is one more thing put on your plate, like the option of purchasing title insurance.

What is title insurance, anyway? And do you really need it? Is purchasing this optional insurance worth the extra money?

What is title insurance?

When you purchase a property, the previous owner will sign the deed over to you. This deed is also known as the title. Once you own the title, you now have legal ownership of the property.

What does title insurance cover?

If a loss occurs related to the ownership, registration, or transfer of the deed, title insurance can help you out. Some situations that title insurance covers are:

  • issues with ownership of the property
  • existing debts or liens against the property (unpaid taxes, fees, etc.)
  • fraud related to land ownership
  • errors in property assessment, such as boundaries and surveys
  • issues that affect the potential sale of the property in the future

Title insurance does not cover any of the following: any known problems with the title

  • environmental issues
  • claims on the land by Indigenous people
  • additions to the property completed by you
  • issues that are only discoverable upon a new inspection of the property
  • problems existing outside of the public record

Basically, suppose some deficiencies couldn’t have been known at the time of the property sale. In that case, title insurance can help pay for the damages.

Be warned: you should be aware that in no way is title insurance a substitution for property insurance. Title insurance only covers issues relating to the ownership of the property, not the property itself.

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How much is title insurance?

When purchasing your house, the idea of willingly paying an additional fee can feel overwhelming. There are many expenses associated with buying a home, and the last thing you want to do is pay for something you don’t have to. So how much does title insurance cost, anyway?

The cost of title insurance varies based on the size and value of your property. That said, it can run you as little as $250. And a bonus is that you only pay the premium once: title insurance is a one-time fee, and it’s valid for the entire time you own your property.

Another advantage of title insurance is that you can pass it on to your spouse, heirs, or children.  This can save a lot of time, money, and headaches for your loved ones, as they’ll have legal proof of the property’s ownership.

Do you really need title insurance?

Title insurance is not a requirement, but it does cover five key areas:

  • Comprehensive coverage – this coverage covers everything related to any losses related to property ownership.
  • Gap coverage – covers the title for the time between the home purchase being closed and when ownership is registered with the Ontario land registration system.
  • Survey coverage – If you purchase survey coverage, you may not need to have your property surveyed again after your purchase.
  • Legal coverage – If the ownership of your home needs requires defending in court, this will cover most of the legal expenses, depending on the policy you have.

DID YOU KNOW: Having title insurance can save you time and money when you’re closing on your home. This means fewer billable hours for your lawyer, which means more money in your pocket (and greater peace of mind.)

Timing isn’t everything

The home buying process can be hectic.  So, paying for title insurance may be hard to consider when signing all the paperwork.

The good news is that you can purchase title insurance after you’ve closed the sale of your house. While the policy will be different from buying it before closing, it’s still available to you. Take the time to speak with your insurance broker to see what policies and options are available to you.

Additional information for Albertans

In Alberta, a condition laid out in the standard residential purchase contract is that you or your lawyer will receive a Real Property Report (RPR). This document outlines things like the property’s boundary and improvements on the property relative to this boundary. When the RPR has a stamp of municipal compliance, it is in line with municipal regulations.

An RPR ensures awareness of issues for the property buyer before closing. This document, however, does not provide any financial protection against problems associated with faults.  Title insurance can cover issues that don’t appear on the RPR and deficiencies that may not be readily noticeable.

So even though you have a Real Property Report, title insurance can still be a great benefit if any future issues arise.  If any problems do come up, title insurance can provide peace of mind as you know you have some financial protection.

The bottom line

Buying a home is possibly the most expensive purchase you’ll ever make. Be sure to protect your investment as best you can. Take the time to speak to your mortgage or insurance broker about title insurance and find out what it can do for you.

Here are some recommendations of where you can buy title insurance: