5 FAQ About Property Title Insurance

Dated: August 31 2022

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“I have home insurance, isn’t that enough?” “Property title insurance is expensive, what do I need it for?” “Is title insurance mandatory?” 

As a real estate broker, I notice buyers often have little to no idea what Property Title Insurance (PTI) is. Therefore, I include this topic in my first meeting as part of the buyers’ checklist. I prefer to discuss it with my clients right away and take this topic off their plate because at closing there are so many other things to think about. 

So, let’s get to it.

“Title” is a legal term that means legal ownership of property and registration in the government’s land registration system. Technically, it’s a database that contains all the information on titles, deeds, and mortgages on all privately owned properties in Canada.

Title insurance is a policy that protects you from the risks related to ownership. There are two kinds of residential property title insurance for homeowners:

-New home title insurance for when you purchase a house or property 

-Existing home title insurance for when you want to insure the title of your existing home

Do I Need to Purchase Title Insurance?

As a new or current homeowner, you are not obliged to have property title insurance. However, your lender might require you to purchase title insurance as protection for them when applying for a mortgage.

Unlike home insurance, with title insurance, you pay the premium once. The premium amount depends on certain factors, including the type of house, location, principal amount, and the number of mortgages taken out on the property.

The policy will protect your title until the end of your ownership. It also covers losses and sometimes legal costs. Some policies even extend to protect the person who will inherit your property.  No two policies are the same, so talk to your lawyer to better understand what you are covered for.

What Does It Cover?

A title insurance premium can protect you from: 

-Encroachment issues such as a structure on your property that needs to be removed because it is on your neighbour’s property

-Title fraud

-Errors that occur in surveys and public records

-Other title-related issues that could affect your ability to sell, mortgage, or lease your property in the future.

What It Won’t Cover?

Title insurance will not cover you against the following:

-Known title defects that were revealed to you before you purchased your property

-Environmental hazards such as soil contamination on the property 

-Indigenous land claims

-Problems that would only be discovered by a new survey or inspection of your property, such as the size of the property is smaller than originally thought

-Matters that are not listed in public records including unrecorded liens and encroachments

-Zoning bylaw violations from changes, renovations, or additions to your property or land that you are responsible for creating.

How Much Does It Cost?

The actual cost of title insurance varies, depending on the purchasing price, province, and the number of mortgages on the property. Generally, title insurance will cost you a one-time fee of a few hundred dollars. Residential property title insurance is normally purchased from a title insurance company such as First Canadian Title or Stewart Title. First Canadian Title Company has an online calculator where you can plug in your details and get a quote on how much residential title insurance will cost you.

How Can Title Insurance Protect You?

Here are some of the ways taking out a title insurance policy can protect you and your new home:

Title fraud – If another person fraudulently steals your identity and remortgages your home, title insurance will cover the amount owed on your property.

Defect title – If the title to your property is not marketable, title insurance would cover hiring counsel to attend court and correct the issue.

Taxes and utility arrears – Any outstanding property taxes or unpaid utilities would be covered under your premium.

Encroachments – Title insurance covers the removal of encroachments on your property, such as a fence, and reconstructs it within the proper property line.

No matter how small a problem it may be, if the title to your property isn’t clear, you may spend your time and money to resolve it. Title insurance offers homeowners peace of mind on one of the biggest purchases they’ll make.

If you need professional advice or opinion on your home value or have questions about selling or buying a home, send me a message!

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Irina Arkhipova

I believe a successful transaction is one in which my clients’ needs are beyond satisfied. The only relationship I seek to build is one based on trust, integrity and care for my clients, which m....

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