Hello everyone! We’re back with another educational real estate blog! As a Toronto real estate agent, our team of experienced realtors have seen it all. Our goal is to ensure our clients and readers are educated when it comes to buying or selling their homes. In today’s blog, we are covering something very important and that is Title Insurance. What is title insurance, why do I need it, and what does it cover? So let’s get to it. But first, have you ever heard the story about the couple who was away on vacation and their home was sold out from under them? THIS IS WHY YOU NEED TITLE INSURANCE!
Yes, this actually happened in Etobicoke, Ontario! While there was fraud, and false identification, impersonation, this was something that occurred in our own backyard. While it’s not a likely scenario, it’s always good to be prepared, and in this case, have all the insurance up to date! So that brings us back to Title Insurance, so, what is it?
The title refers to the ownership and legal rights of the property in question, thus the title insurance insures that ownership and protects the owner against losses accrued due to defects in the title. Should you run into a snag in terms of title, your insurance covers associated damages and incurred costs, including the legal expenses required to protect your rights.
What does title insurance cover?
Title insurance covers a range of Unknown Title Defects that may be discovered. This includes:
- Title fraud (when scam artists steal your title and attempt to sell or mortgage your home unbeknownst to you like in the example above)
- Any liens against the home and property (a right to a title until an owed debt is paid)
- Boundary or Encroachment violations (if your property or structure is found to be part of someone else’s ownership)
- Clerical errors on public records or surveys
- If you run into a problem with title ownership, it can potentially prevent you from applying for a new mortgage, selling the property, or renting it out. The insurance will cover the issues involved as well as the legal fees associated with defending your rights.
What does title insurance NOT cover?
Like all insurance policies, there are some coverage exclusions. In Title insurance, this includes Known title defects such as:
- Environmental hazards (any combination of toxic biological, chemical, or physical environmental agents that can adversely affect the property, including natural disasters.)
- Indigenous land claims
- Current and new discrepancies found in post-purchase surveys
- Issues cloaked from public record
- Boundary and zoning by-law violations, should you choose to build or expand.
- Fire, flood, and sewer damage
- Theft
- Reasonable property wear and tear
- Issues, losses and damages not related to the title.
How Much Does Title Insurance Cost?
Like any type of insurance, your policy will vary depending on the size, value, location, mortgage, and insurer. It is important to note that your title premium is not an annual or monthly fee, it’s simply a one-time payment made upon closing.
To get an idea of cost, without submitting hard data, this is what title insurance premiums would look like on single-family homes. To obtain an accurate quote for your home or upcoming purchase, it’s best to get in touch with an experienced mortgage expert or real estate lawyer.
Purchase Price: $500,000
Title Insurance premium: $442.00
Purchase Price: $750,000
Title Insurance Premium: $712.80
Purchase Price: $1,000,000
Title Insurance Premium: $982.80
Is Title Insurance Required?
In theory, there is no legal requirement for title insurance BUT when applying for financial assistance, lenders will ask for proof of title and will likely need title insurance to verify.
The title insurance is applicable after your one-time premium fee for as long as you own the property. In cases where you didn’t buy the title insurance at the time of property purchase, you can always obtain it after the fact.
It’s not a bad nor pricey investment and comes highly recommended by lawyers to help protect yourself, should costly unforeseen damages come your way. Plus, peace of mind is priceless.
If you still have questions, feel free to reach out. For this and other real estate-related blogs, please join our mailing list to get regular content!
