House Title Insurance

Title Insurance: Definition, Why Do You Need It and What Does It Cover and Not

When you’re buying a home, there are several closing costs you need to consider, including a home inspection, real estate lawyer fees, mortgage insurance, and title insurance. Title insurance is an optional policy that can protect you from financial loss if there are issues with the property’s title.

While these upfront costs, You may think about whether title insurance for home buyers is necessary! For that, you need to understand what title insurance is and what it covers and what are the exclusions. All this will help you make an informed decision.

Understanding Title Insurance

In Canada, title insurance is often required by mortgage lenders when purchasing a home. It is a one-time fee that is included in your closing costs. Its primary purpose is to safeguard your lender in case there are any outstanding claims on the property.

Title insurance is there to protect you in case a third party makes an unexpected claim on your property. Let’s go over some common examples:

Liens: If the previous owner had unpaid bills, such as from a contractor, tax authority, or lender, they might attach a lien to the property. You wouldn’t want to be held responsible for those outstanding invoices.

Errors: Sometimes mistakes happen with the title, like incorrect registration or issues with official records. For instance, the former owner might still be listed on the title, or there could be spelling errors that allow someone else to claim ownership.

Title Defects: These are problems with your property’s ownership that weren’t known when you purchased it. It could include undocumented easements and conflicts with neighbors over boundaries that may lead to encroachment. 

Fraud: Unfortunately, there are instances where people pretend to be the property owner or fabricate documents. Title insurance helps prevent someone from stealing your property and selling it or taking out a mortgage on your behalf.

Having title insurance indicates that you don’t have to pay the other party’s claim on your property. And, it also covers the legal expenses involved in proving your title for your property. In short, it’s a way to safeguard your investment and avoid potential financial losses.

What Does Title Insurance Protect?

Title insurance offers protection in various situations, ensuring your peace of mind throughout the life of your property. Here’s what it covers:

Title forgery or fraud: Here’s an instance- Suppose, someone impersonates the property owner or produces fraudulent documents. Then title insurance shields you from the consequences.

Encroachment or survey disagreements: In case your neighbor constructs a structure on your land or there are disputes regarding property boundaries, title insurance provides coverage.

Unknown title problems: Title insurance addresses the issues that can arise after the purchase and hinder clear ownership. This includes undisclosed easements, zoning violations, or other unexpected complications.

Unpaid property taxes or debt liens: If there are property taxes or liens against the title due to unpaid debts, title insurance protects you from bearing the burden.

Other title-related difficulties: Title insurance safeguards your future ability to sell your home by covering unforeseen complications that could hinder the transfer of ownership.

Title Insurance Exclusions

As discussed above, title insurance may cover many things, but there are some title-related exclusions that you should be aware of. Your policy may not cover the followings-

  • Title defects that are known before you purchase the policy
  • Loss of property because of non-payment of mortgage
  • First Nations land claims
  • Claims not listed on public records 

How to Choose Title Insurance?

Purchasing title insurance may be overwhelming. But you can keep a few important tips in mind while choosing insurance-

  • You can insure your total property value
  • Carefully review your property details
  • Your policy date should be activated on your property closing date(if not buying on a later date)
  • Understand what your policy covers and does not cover

Bottom Line

We hope all the above-mentioned information would help choose title insurance for your home.

With the help of platforms like Canada Title Monitoring, you can have peace of mind knowing that your property’s title is being continuously monitored for any changes or potential risks.

By subscribing to our title monitoring tool, you gain proactive protection against unauthorized activities, potential fraud, and other title-related issues. The ability to detect and address problems early on can save you significant time, effort, and financial resources.Visit our official website to discover how our Title Tracker can help you! Or, you can schedule a call to discuss your requirements!