Understanding Title Insurance

Almost every home I have sold, I have been asked the same question ~ what is Title Insurance? Here is a little bit of information that I feel is relevant and can be used as a beginning guideline. for clarity, I have gathered this information from the Financial Services Commission of Ontario.

Title ~ what does it mean? It is a legal term giving you legal ownership to property. When the deed (transfer document) is signed over to you, you obtain "title". The title is then registered in the Government's Land registration system.

Is it a requirement? In Ontario, it is not a legal requirement to purchase Title Insurance. This is something that you should discuss in full with your lawyer, insurance agent or title insurance company. With that information you will be able to make in informed decision and decide whether it is right for you and what your options are beyond that. Title insurance does not replace legal advice when purchasing your property.

What does Title Insurance cover? For a premium, your policy can protect you from such losses as:

• Unknown title defect (something that will prevent you from having clear title of the home)
• Existing liens against the title (unpaid debts ie: utility bills, property tax, mortgage from the previous owner which then require charges held against the property)
• Encroachment Issues (part of your structure is on your neighbours property)
• Errors in surveys
• Title fraud
• Any other title related issues that affect your ability to sell, lease or mortgage your property

What does Title Insurance not cover? When you purchase your insurance, read the policy closely so that you know exactly what is covered and what is excluded. Possible exclusions could be:

• Known title defects (things you were informed of prior to purchasing the property)
• Native land claims
• Zoning bylaw violations due to changes from renovations, additions or changes made to your property
• Environmental hazards (soil contamination)
• Problems discovered with an inspection or new survey
• Items not listed in public records (unrecorded liens or encroachments)

Title Insurance does not provide compensation for non-title related issues. It's not a home insurance policy nor is it a home warranty. It will not provide compensation for things such as:

• General wear and tear on your home
• Damages due to sewer back ups or flooding
• Theft due to burglary

You have the option of purchasing Residential Title Insurance for houses, condos, cottages, rental units, vacant land, co-operatives, leased homes, and rural properties. Depending on your personal situation, you would either purchase a policy as a new homeowner or an existing homeowner. The Owner's Policy protects you, as the owner from various title related losses for as long as you own that property. There is a maximum amount of coverage that will be set. The cost of the insurance will vary on the value of your property but make sure that you insure your property for its full value.

Even if you already own your home or have an intention of buying, you may want to consider this purchase. To find a list of companies that are licensed to sell title insurance in Ontario, visit www.fsco.gov.on.ca and click on Licensing & Registration. From there select Licensed Insurance Companies in Ontario.

Talk it over in detail with your lawyer or insurance broker to see what is best for you!