What is title insurance?
Title insurance is an insurance policy that is used to insure the homebuyer against loss due to problems with the title on the property being mortgaged. These problems would typically involve ownership claims against the property that were not identified during the title search. The title insurance fee is paid with a one-time premium when the loan closes.
Title insurance insures that your title is good both on and off the record, is not limited to the 50 year period required to be searched by the attorney, and protects against fraud and forgeries within the record. The bank will require that the buyer purchase title insurance from an approved title insurance company to insure its mortgage. This is known as Lender’s Title Insurance. The buyer must pay the premium even though the policy only benefits the bank. However, at the closing the buyer has the opportunity to purchase Owner’s Title Insurance that will benefit the buyer.
Homebuyers can be protected against loss by obtaining a title insurance policy, which states that in the event of the property title’s status being anything other than was represented to the buyer and if the insured (buyer) suffers a loss as a result of the title’s defect, the insurer will reimburse the insured for that loss and any related legal expenses, up to the face amount of the policy. While title insurance’s objective of protecting the insured is similar to other forms of insurance, it differs drastically in that most other insurance policies safeguard the insured against future events and title insurance protects the insured from losses or damage he/she might incur from events that have occurred in the past. To achieve this objective, title insurers will perform a comprehensive search of the public records to determine whether there are any negative claims to the subject of real estate and those claims are either eliminated prior to the issuance of a title policy or their exis
Title insurance protects against any defects of record in the title aside from those listed in the policy. Common defects include fraudulent or improperly signed deeds, restrictions such as covenants and easements, unpaid taxes, and encroachments. Most leaders require insurance in the amount of the mortgage to ensure that they have first lien on the property. Many homeowners also choose to purchase an owner’s title policy, which protects them during and after the sale of the home from claims of a superior right to the property by persons in the chain of title. When buying or selling a home, consult a real estate agent who is a REALTOR for professional advice and service.
According to the Rules of Professional Conduct of the Law Society of Upper Canada, lawyers must offer purchasers with the option of closing with or without title insurance, and providing an explanation of each scenario. Here is an excellent discussion of this matter – “Working with a lawyer when you buy a home”. Really it’s insurance like any other insurance you get. Something goes wrong, you call your insurance people, they send someone out to assess the damage and then they “make it right”. If you make a claim, the problem gets investigated and the insurer will either fix it (e.g. paying to move a tool shed that is on the wrong side of your property line or paying an amount owing for taxes or condominium fees that have not been paid to date by the previous owner) or provide you with money for losses or damages suffered. The insurance company may also pay the cost of your legals if the matter ends up going to litigation. The main difference between title insurance and a lawyer’s “opin
