The title of a property is used to define the right of ownership to the land. In purchasing a home, the title of the property is transferred to the new owner or owners. The insurance related to this protects residential or commercial property owners and lenders from losses related to the title or ownership of the property. Although the province of Ontario states that title insurance is optional, if you have purchased a home or commercial property in Ontario, it was most likely communicated to you that title insurance needs to be purchased as it is a requirement for any mortgage lender.
There are two types of title insurance policies: The first is the Owner's policy which protects the property owner from certain title-related losses typically listed in the insurance policy. The second is the Lender's policy covering the Lender from losses that occur if the mortgage is invalid or unenforceable.
What does Title Insurance Cover?
The title insurance policy you purchase will be in place for as long as you hold possession of the property. As with most insurance policies, they are in place to provide the purchaser coverage to protect from potential losses. A Residential Title insurance policy could provide coverage against losses from:
- 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 neighbor's property);
- Title fraud;
- Errors in surveys and public records;
It is also essential to also consider what Title Insurance does not cover, which could 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 initially 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.
It will also not provide compensation for issues that are not related to home warranty or home insurance. Issues such as:
- 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 nontitle related issues.
Benefits of Title Insurance
The benefits of title insurance will allow property owners comprehensive coverage for a one-time cost usually due during purchase closings or refinances. Not only will this allow for peace of mind for the purchasers, but you can be sure that if any defects affect the title of your home, these will be covered by your title insurance policy, and your problem could be easily corrected, which lends peace of mind to the purchasers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.