The word "title" is a legal term that means you have legal ownership of property. You obtain title to property when the existing owner signs the deed (transfer document) over to you. Title is then registered in the government's land registration system.
Title insurance is an insurance policy that protects property owners and their lenders, if any, against losses suffered from title problems or defects, or ownership at the time the policy is issued.
Before agreeing to provide coverage to a property and exclude any risks which they are not prepared to cover, title insurance company generally investigates title and evaluates the degree of risk with the assistance of lawyer doing title search. Title insurance is obtained, typically by the purchaser's lawyer prior to closing a purchase for the benefit of the purchaser as owner's policy, and by lender's lawyer prior to the mortgage fund advancing for the benefit of lender as lender's policy.
Any problem or defect disclosed in the public records, e.g. a title search record, may be listed in the property-specific exceptions.
Title Insurance Coverage
An owner's policy usually provides coverage for the following types of losses:
- 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 also on your neighbour's property);
- Title fraud (see real estate fraud for definition of 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 clear from defects or problems.
Title Problems Not Covered by Title Insurance
Title Insurance does not cover everything, the followings are the possible exclusions:
- Known title defects (that were revealed to you before you purchased your property, by existing owner or public records etc);
- 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.
Non-Title Problems Not Covered by Title Insurance
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 non-title related issues.
Refer to your title insurance policy for a full list of exclusions, restrictions,and terms and conditions.
Types of Title Insurance
There are two main types of title insurance policies:
Protects the property owner from various title-related losses that are listed in the insurance policy, for as long as the property is owned. An owner's policy sets a maximum amount of coverage.
Protects the lender from losses in the event that the property's mortgage is invalid or unenforceable. A lender's policy usually provides coverage for the amount of the property's mortgage.
You can purchase title insurance for both residential and commercial properties.
Types of residential title insurance include:
- Policies for new homeowners
- Policies for existing homeowners
- Policies for lenders in a residential mortgage
Types of commercial title insurance include:
- Policies for individuals purchasing commercial properties
- Policies for lenders in a commercial mortgage
NOTE: The content for title insurance is provided for information purposes only. Please refer to the terms of your title insurance policy for the details of coverage and exclusions.