How important is title insurance?
Saturday Feb 25th, 2023
In short title insurance is very important, before we explain why lets briefly summarize what title insurance is.
What is title insurance?
Title insurance is a policy that protects residential and commercial property owners and their lenders against the losses resulting from the property title or ownership.
There are tow main types, owner’s policy and lender’s policy.
Is title insurance mandatory?
No, it is not.
If there is a mortgage on the property the lender may require the title insurance to be purchased prior to issuing the mortgage.
What does it cover?
The title insurance may provide protection from losses such as unknown title defects, existing liens, encroachment issues, , title fraud, errors in public records or surveys, and other title related issues.
What doesn’t it cover?
It doesn’t cover known title defects, environmental hazards, native land claims, problems that would be discovered by inspection or survey, matters not listed in public records, zoning violations resulting from additions or renovations done by you, non-title related issues.
Are all policies the same?
No, they are not, please read the documents to understand what your particular policy does or doesn’t cover, or how much it covers. Insurers also offer extended policies covering additional risks.
When to purchase?
The best time to purchase the title insurance policy is when the property is purchased, usually it is handled by the lawyer. The policy can also be purchased or upgraded later on.
What type of properties are covered?
Both residential and commercial properties are covered. Most residential properties such as houses, condominiums, co-ops, cottages, rentals, land, rural and so on can be covered.
How much does it cost?
The cost depends on the value of the property and the coverage selected. In general the costs aren’t very significant in the grand scheme of things. Here is a link to a title insurance premium calculator for residential properties by TitlePlus, one of the companies providing the coverage. There is no deductible when making the claim and the premiums are only paid once.
How long does the coverage last?
It lasts as long as one owns the property and typically can be extended if the ownership changes to spouse, children or the estate.
Now that we know what title insurance is let’s get to the bottom of the essence, why it is important to have, and for that we will use some examples of what it covers:
- Unpaid property tax by the seller, it often happens for brand new homes where the property taxes haven’t been assessed by the time the property is sold.
- Unpaid balance on the mortgage.
- Unpaid condo fees.
- Construction lien.
- Structure encroaching the property and needs to be moved.
Another item that deserves it’s own paragraph is title fraud, potentially the most expensive item covered by the title insurance. Nothing new despite the fact it has been mentioned in the news lately and frequently, as we see here in one instance a condo DT Toronto was sold for almost a million without the knowledge of the owner.
As you can see from the above title insurance is like any other policy, hopefully you won’t need it, but if you do the one-time fee paid for the lifetime of the ownership of a property can cover issues anywhere from few hundreds of dollars to very substantial amounts (a maximum coverage per your policy)
In short please do yourself a favour and buy it.
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