What Is Title Insurance?

October 16, 2012

Do you have title insurance on your home? I bet you do! And for good reason. It’s there to protect you from fraud. Each year title fraud costs Canadians hundreds of thousands of dollars. If you aren’t sure if you have title insurance and what this important tool covers then you’ve got to read on.

A Real Estate Transaction Costs You Money

Well that’s obvious. But in addition to buying your home, there are other costs at closing.
One of these costs is title insurance. All mortgage lenders require that you take out a title insurance policy when you close your mortgage. It’s not optional.
What Is Title Insurance?
It’s insurance on the title.
But what is a title?
When you buy a home, you are in effect buying the title to the property, commonly referred to as a “deed” or “transfer of land.” This means that you own the property and your lawyer/notary has registered you as the owner in a land titles system.
Why do you want title?
Because it means that you will be able to sell your property in the future or obtain financing against your home at any point.
Do I Really Need Title Insurance?

Yes!
Title fraud is a serious threat to Canadian home owners. If you don’t have title insurance you open yourself up to risk. Fraudsters pose as you, the homeowner, and can finance a mortgage against your property. Or worse, sell your home while you are living in it like this B.C. man. Scary but true.

Who Pays For Title Insurance?

You do. There is a trend amongst lenders to associate themselves with particular insurers and deduct the one time title insurance premium from the mortgage advance before the funds even arrive at your lawyer’s office. If you are buying real estate without a mortgage your lawyer can offer you a policy.

How Much Does Title Insurance Cost?

The premium is based on the market value of your home and every company has a sliding scale. The average title insurance cost is roughly $250 – $275. If your home is valued over $1,000,000 the price doubles. Keep in mind there is also sales tax on the premium.

Are There Other Benefits?

Of course! It helps make the real estate transactions a lot easier to close for all parties involved. Here are 9 benefits of taking out a title insurance policy:

1. Fast and efficient closing process: title insurance will help ensure your transaction closes on time

2. Survey coverage:  protects against unmarketability (not being able to sell your property in the future or obtain financing against your home) as a result of defects that would have been disclosed on an up‐to‐date survey, Real Property Report or Location Certificate

3. Fraud and forgery: protection against fraudulently registered mortgages against your title

4. Duty to defend – the legal fees associated with resolving insured title issues will be covered

5. Building permit coverage: coverage for renovations completed without a permit that result in a loss

6. Zoning coverage: protection should a property not meet municipal zoning requirements

7. Competing interests: protection in the case of someone claiming an interest in your land; for example, an easement for a driveway or a builder’s lien

8. Problem solving/facilitates closings: provide coverage for known defects such as encroachments,delays in registration and zoning violations

9. Saving money: requesting a homeowner title insurance policy at the time of your real estate purchase may be the best opportunity for you to buy your policy at a lower price. If your lawyer/notary is ordering a policy for your lender, you can buy a homeowner policy at a lower cost.

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Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.