PROTECTING YOUR HOME

A home is usually the largest single investment any of us will ever make. When you purchase your home, you will need to purchase several types of insurance coverage in order to fully protect your home and personal property. Homeowners insurance protects against physical damage loss from fire, theft or wind damage. Flood insurance protects against rising water.

Title insurance is a unique Insurance coverage that protects you against hidden title hazards that may threaten your financial investment in your home. While other Insurance Premiums require on-going fees and premiums, Title Insurance is purchased at the time you buy or mortgage your home, as a one-time premium, which is based on the purchase price of your home.

WHAT EXACTLY IS TITLE INSURANCE

The word “Title” is a legal term that means you have legal ownership of property. You obtain title to property when the owner signs the deed (transfer document) over to you. Title is then registered in the government’s land registration system.

When you purchase or mortgage your home, instead of purchasing the actual building or land, you are really purchasing the Title to the property – the right to exclusive occupation and use the space. That title may be limited by rights and claims asserted by others, which may limit your use and enjoyment of the property and can even result in financial loss. Title insurance is designed to protect you against these types of title hazards, which prevent giving you Good Title.

 

There are two protections from Title Insurance:

  1. Lender or mortgagee protection; and
  2. Owner’s coverage and protection

LENDERS TITLE PROTECTION: Typically, Institutional Lenders require Mortgagee title insurance as security for their investment in real estate (just as they require fire or other insurance coverage of your home). When title insurance is provided, lenders are willing to make mortgage money available in distant locales where they know little about the market.

OWNER’S TITLE PROTECTION: This title insurance lasts as long as you, the policyholder – or your heirs – have an interest in (i.e. own) the insured property. This may even cover you for any liability after you have sold the property.

Your title insurance policy will protect you as long as you own your property, and will cover losses up to the maximum coverage set out in the policy. It may also cover most legal expenses related to restoring your property’s title

WHAT DOES TITLE INSURANCE COVER:

For a one-time fee, called a premium, a title insurance policy may provide protection from such losses as:

  • 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 (SEE BELOW);
  • Errors in surveys and public records; and
  • Other title ­related issues that can affect your ability to sell, mortgage, or lease your property in the future.

Title Insurance protects you for the duration of your ownership of the property and covers losses up to the maximum coverage set out in the policy. It may also cover most legal expenses related to restoring your property’s title.

WHAT TITLE INSURANCE DOES NOT COVER:

When purchasing title insurance, it is important to read the policy and ask questions to be aware of the coverage that is provided. You also
need to be aware of possible exclusions, which may include:

 

  • Known title defects (that were revealed to you before you purchased your property);
  • Environmental hazards (e.g. soil contamination);
  • Native land claims;
  • Problems that would only be discovered by a new survey or inspection of your property (e.g. the property is smaller than originally thought);
  • Matters that are not listed in public records (e.g. unrecorded liens and encroachments); and
  • Zoning bylaw violations from changes, renovations or additions to your property or land that you are responsible for creating.

You need to carefully review your title insurance policy, as it may include additional exclusions and exceptions that are specific to your property

WHAT TITLE INSURANCE IS NOT:

Title insurance does not provide compensation for non-­title related issues. It is not a home warranty or home insurance policy, and will not provide compensation for:

  • Damages due to flooding, fire or sewer backup;
  • General wear and tear of your home (e.g. replacing old windows, a leaky roof, or an old furnace);
  • Theft (e.g. a burglar breaks into your home and steals your television); and
  • Other losses or damages due to non-­title related issues. Refer to your title insurance policy for a full list of exclusions, restrictions, and terms and conditions.

WHAT IS TITLE FRAUD?

Title fraud (or real estate title fraud) is a form of real estate fraud that harms individual homeowners and their lenders. Title fraud typically involves a fraudster using stolen personal information, or forged documents to transfer your home’s title to him/herself (or an accomplice), without your knowledge.

The fraudster then gets a mortgage on your home and disappears with the money. If you are a victim of title fraud, you may be able to receive compensation for your losses if you submit a claim through the government’s Land Titles Assurance Fund (LTAF). For more information on the Land Titles Assurance Fund visit www.gov.on.ca/LTAF/.

OTHER HIDDEN TITLE HAZARDS

In spite of all the expertise and dedication that go into a title search and examination, hidden hazards can emerge after closing, resulting in unpleasant and costly surprises. Some examples of hazards include:

  • A forged signature on the deed, which would mean no transfer of ownership to you
  • An unknown heir of a previous owner who is claiming ownership of the property
  • Instruments executed under an expired or a fabricated power of attorney
  • Mistakes in the public records

Title insurance offers financial protection against these and other covered title hazards. The title insurer will pay for defending against an attack on title as insured, and will either perfect the title or pay valid claims – all for a one-time charge at closing.

Your home is your most important investment. Before you go to closing, ask about your title insurance protection, and be sure to protect your home with an owner’s title insurance policy.

DISCLAIMER: This webpage is provided for information purposes only. Refer to the terms of your title insurance policy for the details of coverage and exclusions.

SOURCE: Financial Services Commission of Ontario Website