What is Title Insurance in Canada?

Everything you need to know about title insurance from what’s covered and what isn’t to how much it costs.

Title insurance is an insurance policy designed to protect homeowners and lenders from challenges concerning the ownership or title of a property. It safeguards against specific risks and issues that could arise relating to the title’s validity.

Coverage Features

Protection Against Title Fraud and Forgery
Title insurance policies offer protection from fraudulent activities. One common issue is title fraud, where an unauthorized person might unlawfully claim ownership through deceitful means, such as forgery. This protective measure ensures that the rightful owner or lender retains their interests against fraudulent claims.

Encroachment and Survey Disputes
Another aspect covered by title insurance includes encroachment and survey disputes. If a neighbouring property owner extends a structure onto your land or if there are discrepancies found in the property’s boundaries as determined by survey reports, title insurance provides coverage for defence and resolution of these issues.

Unknown Title Defects
Title insurance aims to shield property owners from unknown title defects. These are issues that might obstruct clear ownership, often arising from unpaid liens or registration errors. By securing this coverage, homeowners can prevent financial burdens related to these unexpected defects.

Liens
Title insurance includes protection against financial obligations that may be linked to the property. This involves covering unpaid property taxes or debts, known as liens, that might lead to ownership disputes if settled post-purchase.

Easements and Servitudes
Title insurance also addresses issues concerning easements or servitudes that have not been disclosed prior to purchase. Easements grant rights to others for specific uses of the property, and if undisclosed, they can disrupt the property owner’s use of their land. Insurance consequently provides protection against such claims.

Zoning Non-Compliance
In some cases, properties may not comply with municipal by-laws concerning zoning. Title insurance provides coverage for these situations, assisting property owners if compliance issues arise post-purchase.

Post-Policy Date Events
Certain title insurance policies extend protection to cover events that occur after the policy has been issued. This includes potential encroachments where a neighbouring property owner might construct a building or extension partially on another’s property after the purchase.

Exclusions in Coverage

Known Title Defects
Title insurance does not extend coverage to known title defects identified at the time of property acquisition. These are pre-existing issues known to the buyer at the point of purchase.

Environmental Issues
Title insurance policies do not cover environmental factors such as soil contamination or pollution. Homeowners seeking coverage for these types of issues must consider additional environmental insurance.

Indigenous Land Claims
Insurance policies also exclude any claims related to rights or interests held by Indigenous groups on land. These claims are not typically addressed under standard title insurance coverage.

Issues from New Surveys or Inspections
Title insurance does not protect against issues discovered through new surveys or inspections conducted after the purchase. Homeowners should ensure thorough inspections prior to purchasing to mitigate these issues.

Additions or Changes to the Property
Modifications or additions made by the homeowner are explicitly excluded from title insurance coverage. Such activities fall beyond the scope covered by title insurance policies.

Cost and Duration

Premium Costs
The cost associated with title insurance generally falls between $200 and $500. This fee varies according to property value and the service provider.

One-Time Payment Structure
Title insurance requires a single payment upon purchase. No further payments, such as annual premiums, are needed.

Duration of Coverage
A policy remains effective for the duration an owner possesses the property and may extend to heirs, spouses, or children in certain conditions, providing prolonged protection without additional costs.

Acquisition of Title Insurance

Procurement through Real Estate Lawyers
Many opt to purchase title insurance through their real estate lawyers. This often occurs during the closing process of purchasing a property.

Insurance Brokers and Providers
Alternatively, insurance policies can be acquired directly from insurance brokers or title insurance companies. Reputable providers in Canada include entities such as the Chicago Title Insurance Company, FCT Insurance Company Ltd., Lawyers’ Professional Indemnity Company (TitlePLUS), Travelers Guarantee Company, and Stewart Title Guaranty Company.

Administrative and Regulatory Framework

Mandatory Lender’s Policy
Most mortgage lenders stipulate the necessity for a lender’s title insurance policy. Such policies secure the lender’s interests, ensuring coverage in cases where title issues arise.

Optional Owner’s Policy
On the other hand, an owner’s policy remains optional for homeowners. It offers additional protection beyond the basic lender’s policy, covering personal interests and claims related to the property’s title.

Regulatory Oversight in Canada
Title insurance in Canada falls under the governance of provincial authorities. In Ontario, for example, it’s regulated by the Financial Services Commission of Ontario, the Autorité des Marchés Financiers regulates title insurance in Quebec, and the BC Financial Services Authority provides oversight in British Columbia.

Benefits of Title Insurance

Comprehensive Coverage
Title insurance offers extensive coverage that exceeds what might be provided by a solicitor’s opinion on title. This coverage includes fraudulent activities that might occur after purchasing the property.

Assurance and Security
The security provided by title insurance allows property owners to avoid legal and financial disruptions related to title issues. By securing this insurance, homeowners are equipped to handle unforeseen title disputes.

Legal Expense Coverage
In instances where legal defence is necessary to resolve disputes concerning a home’s title, title insurance often includes coverage for legal expenses. This protection aids in ensuring the property owner’s financial stability during litigation.