Is Title Insurance Right For Your Home Insurance Needs?

Is Title Insurance Right For You?
Title insurance is growing in popularity in Canada. But what is it exactly? Should you get it? Do you need it? Whether title insurance is right for you is something you should discuss with your real estate agent or lawyer, as it depends on the circumstances of your transaction. This article provides some background information.
Title to Property
Title insurance is unlike any other kind of insurance. It is not house insurance, which only protects the contents of your home or its structure and for which you pay a monthly premium. Title insurance protects your ownership of the property and protects you against many factors. Unlike house insurance, you pay a one-time premium with no deductible. Title insurance usually covers all legal expenses related to restoring title, meaning you do not have to take time off work and deal with the added stress needed to defend yourself.
Title is the legal term for ownership of a property. Buyers want a "good and marketable" title to a property. A good title means the property is appropriate for the buyer's purposes, and a marketable title means the buyer can convey this title to someone else. Public records are usually "searched" before the closing to determine previous ownership of the property, as well as prior dealings related to it. The search will reveal very valuable information such as existing mortgages, liens for outstanding taxes and utility charges that may be registered against the property.
Having this done allows for these problems to be cleared up before the home sale is closed. For example, the seller's mortgage will be discharged and outstanding monetary expenses will be paid at closing.
However, problems regarding title may not be discovered and remedied before closing. Thiss can make the property less marketable when the buyer tries to sell it and, depending on the nature of the problem, it may also cost money. For example, the survey might have failed to show that a dock and boathouse built on a river adjoining a vacation property was built without legal permission. The buyer of the property could be out-of-pocket if he is later forced to remove the dock and boathouse.
What does Title Insurance protect?
There is a series of matters covered by a title insurance policy that deals with events that occur after the date of the purchase. These include fraud and forgery after the policy date, matters that are not protected by the lawyer’s usual title opinion. There may also be some cost savings that can be achieved from title insurance.
Title insurance policies can be issued in favour of a purchaser (on new/resale homes, condos and vacation properties), a lender, or both the purchaser and lender. Lenders will sometimes require title insurance as a condition of making the loan. Title insurance is made to protect purchasers and/or lenders against loss or damage sustained if a claim that is covered under the terms of the policy is made.
In addition, there are many types of risks that are usually covered under a title insurance policy, such as survey irregularities, forced removal of existing structures, unregistered easements and rights-of-way and lack of pedestrian or vehicular access to the property. For a risk to be covered, it has to have existed as of the date of the policy.
However, as with any type of insurance policy, there are certain types of risks that might not be covered, such as native land claims and environmental hazards. Before obtaining title insurance, discuss with your lawyer or real estate agent what risks are covered and what are excluded.

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