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Title Insurance. What is it and Why You Need It.

Title Insurance.  What is it and Why You Need It.

When purchasing a new property, you may be looking to save money wherever you can.   One of the costs you may come across is for title insurance. You’re probably thinking “heck, another unexpected cost!”.   For the few hundred dollars that title insurance costs, we think it’s a “no brainer” and will let you sleep at night knowing that you’re not on the hook for some big expenses should things go sideways with the title to your property.

Title?  What’s that? (in English please)

Your property’s title is legal proof that you are its owner. It describes your rights to the land and any limitations like giving your local phone and power companies legal right to construct, repair, replace and operate wires on a section of your property.

Your title lists the legal owners, any registered mortgages and/or liens, describes any easements (someone like the cable company that may need access to your land) , and provides many other important details. 

So what’s title insurance?

While this sounds straightforward, your home’s title can be subject to issues that can arise.   What sort of issues? For example, what if the previous owner built a shed that sits on the neighbour’s property which now needs to be torn down.  That’s covered by title insurance. 

What if the previous owner didn’t pay his contractor and ended up with a lien on the house?  That’s covered too.  

Discover that someone has fraudulently gotten access to your title and took out a mortgage?  Title insurance has you covered.

What else does title insurance cover?

We always recommend checking your specific policy for the details, but in general, here’s what you are covered for when you take out a title insurance policy:

  • 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 on your neighbour’s property);
  • Title fraud;
  • Errors in surveys and public records
  • Other title-related issues that can affect your ability to sell, mortgage, or lease your property in the future.

Do I have to pay an ongoing premium like I do for my car insurance?

Actually, title insurance is quite the “bargain” in that there are no ongoing premiums, just a one-time premium that covers you for as long as you own the property. Most residential title insurance policies extend coverage to your heirs through a will, to a spouse in the event of a divorce, or to children when the property is transferred from parents to children for nominal consideration. 

How much can I expect to pay?

A one-time premium cost about $350 for a $500,000 home and goes up based on the price and type of property.  The peace of mind that knowing your greatest asset is protected is probably well worth the money.

How do I get a policy?

Your lawyer will typically apply for, and include a title insurance policy as part of your purchase or refinancing, so there’s little to nothing you need to do.   When you get the closing documents from your lawyer, your policy documents should be included within the package.

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