Title insurance is becoming increasingly popular among homebuyers everywhere. Title insurance is something that can protect you and your mortgage lender in the event of a title property defect. However, with the growing popularity of the insurance policy, many people are wondering if it’s a necessary expense.
What Is Title Insurance?
Title insurance a type of indemnity insurance. Indemnity insurance typically refers to an insurance policy that compensates the insured party for any unexpected damages or losses up to a certain extent. That extent is usually the amount of what the loss would be in total.
Title insurance refers to an indemnity policy that offers protection for both the lender and the home buyer. There are two common types of insurance policies that fall under the jurisdiction of title insurance: Lender’s title insurance and owner’s title insurance.
Virtually all lenders require that the borrower purchases a lender’s title insurance policy to protect the lender in the event that the seller isn’t legally able to transfer his or her title of ownership rights. However, a lender’s policy will only protect the lender from loss—not the buyer.
How Much Does Title Insurance Cost?
In Canada, title insurance costs vary by location. The cost of title insurance varies greatly depending on a few factors. Those factors include the location, type, and value of the homebuying transaction. The good news, is that once you pay for your title insurance policy, you won’t have to pay for it again since it’s a one-time fee that covers administrative costs, title searches, etc.
How much does title insurance cost in Ontario?
Title insurance in Ontario is typically around $250.
How much does title insurance cost in Alberta?
In Alberta, it could cost up to $275 for title insurance.
How much does title insurance cost in British Columbia?
In British Columbia title insurance costs around $225 with $175 towards the lender’s policy and $50 towards the owner’s policy.
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Is Title Insurance Required?
Title insurance technically isn’t mandatory in Canada. However, many mortgage lenders do require it—especially if there aren’t any building location surveys available.
While title insurance isn’t a requirement, it’s a worthwhile investment because it can offer both parties—the lender and homebuyer—protection from the risks mentioned above, plus peace of mind.
What Is Covered with Title Insurance?
The types of risks that are usually covered under title insurance include—but are not limited to:
- The forced removal of existing structures
- Survey irregularities
- Claims due to fraudulent circumstances
- Forgery or duress
- Unregistered easements and/or rights of way
- A lack of access to the property—both pedestrian and vehicular
- Work orders
- Set-back and zoning non-compliance or deficiencies
For any of the above risks to be covered, they would have to have existed prior to the date of the title insurance policy. It’s also important to note that some claims, as with any type of insurance policy, may not be covered. For example, environmental factors and hazards or native land claims aren’t typically included in the coverage, so it’s crucial to discuss any exclusions with a lawyer before signing.
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Title to Property
“Title” is the legal term for ownership property. If you own your home, then you own its title. When home buyers are looking for their new or next home, it’s important that they find one with a clean and marketable title.
By “clean”, we mean that the title to the property does belong to the current homeowners with no other stipulations that could delay or stop the sale completely. By “marketable”, we mean that the title’s information can easily be searched.
Titles to property are a matter of public record. So, before the home buyers and sellers close the deal, a title to property search is conducted to ensure that the current home ownership of the property is legitimate. That includes ensuring that there are no existing mortgages, outstanding tax liens, outstanding utility charges, and so on registered against the property.
Any outstanding issues must be cleared up before the final sale. That means the current homeowner must pay any outstanding mortgages, taxes, utilities, etc. before they can legally turn the title of the property to the new homeowners.
Why Do You Need Title Insurance?
Defects to the title of property more often aren’t disclosed before the final sale of the home. In some cases, they are disclosed, but not taken care of. This type of thing can make the property less marketable in the future should the current buyer decide to sell, and depending on the nature of the defect, it can become an expensive endeavor.
For example, the title of property could have been conveyed incorrectly, as in not towards the actual owner of the property. That means that the real owner of the property could come forward and claim his or her rights to the property, leaving the current homeowner in quite a difficult situation.
Additionally, anything done illegally on the property involving construction can later come to light, becoming the financial and legal responsibility of the new homeowner to remedy.
Title insurance protects homebuyers from these types of issues, financially speaking. It also protects home buyers from any defects or delays in the sale.
Title insurance is typically purchased when you’re in the process of the buying a new home. However, you can purchase it at any time while you still own the property.
Residential title insurance can be purchased through a lawyer or a title insurance company. You can also contact the insurance broker. It’s best to speak with your lawyer first so you can get all your bases covered and make sure you’re working with a reputable lender.
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