“Title” is a legal term to describe the right of ownership to land and improvements on it, like a house. When you purchase a home, title is transferred to you, the new homeowner.
Title insurance is an insurance policy that protects you, the homeowner, against challenges to the ownership of your home or from problems, or defects, related to the title to your home. The policy provides coverage against monetary losses due to title defects, even if the defects existed before you purchased your home. A title defect is an issue that prevents free and clear ownership. There are many types of defects such as rights of way, encroachments (from neighbouring properties), unpaid liens, etc. An extreme case might be a property where access to the property is over-land owned by someone else. If challenged, you would have no legal access to your own property.
Title insurance policies protect you for as long as you own the property. It protects against a number of risks that a lawyer’s opinion on title may not cover. These risks include:
– Fraud and forgery, including someone taking your title through fraud or forgery
– Encroachments that would be disclosed by a new survey (for example, a neighbour’s deck being partly on your land)
– Easements (the right acquired for access to, or over, another person’s property for a specific purpose, such as for a driveway or public utilities over the property that would be disclosed by a new survey)
– Zoning non-compliance (i.e. where the property use does not meet the local municipal by-laws)
– Someone other than the homeowner having interest (i.e. a previous owner of the property not being discharged from title)
Title insurance is not a replacement for a title search. It is used in conjunction with a title search. Title insurance protects you from things that don’t show up or can’t be remedied prior to closing. It is usually purchased when you buy your home or when you refinance, although it can be purchased at any time. You will only make one premium payment when you first buy the insurance. If you are purchasing or refinancing your home, you should discuss title insurance with your lawyer, who can arrange the purchase of a homeowner’s policy.
The policy can provide broader coverage than a lawyer’s opinion on title, as well as post-purchase fraud coverage. As with any insurance, coverage can vary from policy to policy.
Title Insurance buys you peace of mind. As the policy covers the items outlined above, you can rest easy knowing, if there are defects affecting the title of your home, that they will be covered by the title insurance policy: your title insurer will take steps to reimburse, financially, for the defect. What it won’t do is fix it. Most lawyers won’t handle a real estate transfer without it and that is in your own best interest.
– Chip Barkel, MCNE, SRES, Toronto Real Estate. Extraordinary Service. Top Results.