When I breakdown closing costs to my clients on their upcoming residential purchase, my clients always request more information on their title insurance premium. Their questions include:

Questions explained

What is title insurance?

Title insurance is a one-time premium insurance policy paid on the closing of a home. It protects both buyer and lender (if applicable) against financial loss stemming from issues or defects in the title of the property that include past defects and undiscovered issues.

There are two types of policies issued in the purchase of the home:
1.   Owner’s Policy which protects the buyer’s interest in the home
2.   Lender’s Policy which protects the mortgagee’s interests if you arranging a mortgage to purchase the home. This policy will be for the mortgage amount in favour of the lender. 

Title insurance is not the same as a buyers home and fire insurance coverage that would also be arranged on the purchase property and in place for closing. Home and fire insurance coverage covers your physical dwelling and personal property in case of a fire and personal liability on the home.  

How much is the premium?

The cost of your title insurance is based on a few factors that include your purchase price, extent of coverage, mortgage amount, class of lender and title insurance provider. Title insurance is arranged through your real estate lawyer and the one-time premium is paid as a cost on closing.

What does title insurance cover?

Title insurance protects against a vast majority of issues or defects related to title and may include:

Purchasing title insurance also offers the buyers convenience and efficiency in the closing process. Most lenders will require a copy of the lender title insurance policy before advancing funds and they rely on that coverage to protect their interest if there is a undiscovered defect on closing. The same coverage assist the buyers for the full purchase price of their home. Though title insurance for buyers is not mandatory, is it highly advisable to purchase owner title insurance.

If you have more questions about title insurance coverage, ask your real estate lawyer to provide you with more information. 

It is important to note that title insurance is not blanket coverage and most policies have exclusions to coverage that may include known defects, native land claims, environmental hazards, zoning bylaw violations from renovations to the property, issues that would arise from a new survey or inspection of the property and issues not listed in public records.  

How long does the coverage last?

Title insurance coverage lasts as long as you own the home. After you pay the one-time premium and close your home purchase, you will receive a copy of the owner’s title insurance policy from your real estate lawyer for your records. 

 Residential title insurance may even extend coverage to your heirs through your Will, a spouse in the event of a divorce or even children.

Do I really need it?

For homebuyers, title insurance is not mandatory but strongly recommended by real estate professionals. The hope is that you never have to use the policy, but if defects arise from your purchase transaction, you have peace of mind knowing you have coverage.

Title Insurance Companie that service Ontario properties: