Understanding Title Insurance

What is “Title”?
 The word “title” is a legal term that means you have legal ownership of property. You obtain title to property when the owner signs the deed (transfer document) over to you. Title is then registered in the government’s land registration system.

What is Title Insurance?
 Title insurance is an insurance policy that protects residential or commercial property owners and their lenders against losses related to the property’s title or ownership. The policy provides coverage against losses due to title defects, even if the defects existed before you purchased your home. A title defect is a problem with the title which prevents free and clear ownership.

What Does Title Insurance Cover?
 For a onetime fee, called a premium, a title insurance policy may provide protection from such losses as:
-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 neighbour’s property);

-Title fraud;

-Errors in surveys and public records; and

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

Your title insurance policy will protect you as long as you own your property, and will cover losses up to the maximum coverage set out in the policy. It may also cover most legal expenses related to restoring your property’s title.

Do I Really Need Title Insurance?
 Title insurance is not a requirement in Ontario. The decision on whether or not you should purchase title insurance should be discussed with your lawyer, title insurance company or insurance agent/broker, to fully understand what type of protection title insurance can provide you, and to determine if other options exist. Once you get all the facts, you can make an informed decision based on your specific situation and needs. It is important to keep in mind that title insurance does not replace legal advice when purchasing property.

What Does Title Insurance Not Cover?
When purchasing title insurance, it is important to read the policy and ask questions to be aware of the coverage that is provided. You also need to be aware of possible exclusions, which may 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 originally 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.

You need to carefully review your title insurance policy, as it may include additional exclusions and exceptions that are specific to your property.

 Title insurance does not provide compensation for non title related issues. It is not a home warranty or home insurance policy, and will not provide compensation for:
-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.

Refer to your title insurance policy for a full list of exclusions, restrictions, and terms and conditions.

Please check Financial Services Commission of Ontario for more detail:
https://www.fsco.gov.on.ca/en/insurance/brochures/Pages/understanding-title-insurance.aspx