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 one time 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 Does Title Insurance Not Cover?
When purchasing title insurance, it is important to read the policy and ask questions to be aware of the coverage that is provided. You also need to be aware of possible exclusions, which may include:
- Known title defects (that were revealed to you before you purchased your property);
- Environmental hazards (e.g. soil contamination);
- Native land claims;
- Problems that would only be discovered by a new survey or inspection of your property (e.g. the property is smaller than originally thought);
- Matters that are not listed in public records (e.g. unrecorded liens and encroachments); and
- Zoning bylaw violations from changes, renovations or additions to your property or land that you are responsible for creating.
Title insurance does not provide compensation for non title related issues. It is not a home warranty or home insurance policy, and will not provide compensation for:
- Damages due to flooding, fire or sewer backup;
- General wear and tear of your home (e.g. replacing old windows, a leaky roof, or an old furnace);
- Theft (e.g. a burglar breaks into your home and steals your television); and
- Other losses or damages due to non title related issues.
What Coverage Does Residential Title Insurance Provide?
Residential title insurance can provide:
- Comprehensive Coverage – It provides comprehensive insurance coverage against losses related to the property’s title. It may also provide coverage for your lawyer’s negligence or errors relating to title risks that are covered by your policy.
- Gap Coverage – It insures you for the “gap” between the time your property purchase is finalized (home closing) and the time your title is registered in Ontario’s land registration system.
- Survey Coverage – It may eliminate the need for a new up-to-date survey of your property. It is acceptable to most lenders as an alternative to a survey or Real Property Report (RPR).
- Legal Coverage – The title insurance company will pay for most legal expenses involved in defending your home’s title.
- Savings of Time and Money – It simplifies the closing process for your lawyer, thereby saving you time and money.
When is Residential Title Insurance Normally Purchased?
Residential title insurance is usually purchased when you buy your home. However, you can also purchase residential title insurance anytime after you purchase your home.
Note – Title insurance policies for existing homeowners are slightly different than policies that are obtained at the time a property is purchased.
Here is a link to Ontario government page: Understanding Title Insurance