Introduction to Title Insurance
Title insurance is a crucial part of any real estate transaction, offering essential protection for property owners against a range of potential risks. When purchasing title insurance, you are safeguarding your investment from issues that could threaten your ownership, such as title defects, unknown title defects, and unrecorded liens. These problems can arise unexpectedly, even after a thorough title search, and may result in financial losses or legal complications. Title insurance covers these risks, protecting the property’s title from past ownership issues that may arise after closing, ensuring that property owners can move forward with confidence, knowing their title is secure. In the world of real estate, where surprises can be costly, title insurance provides peace of mind by protecting your interest in the property and helping to resolve any title-related issues that may surface after closing.
What is Title Insurance?
Title Insurance exists to protect property owners and lenders against financial losses that stem from a number of risks related to the property or title. Purchasing a home can be the single biggest purchase one can make in their lifetime. Title insurance helps ensure clear ownership and a clear title, which are essential for a smooth property purchase and real estate purchase. That’s why it is essential to understand what insurance companies are offering to protect your interests.
What if someone else claims that they own part of the property? What if there is a hidden lien, or an open permit issue that resurfaces after closing? These types of issues are where title insurance steps in to protect you. Title insurance can also offer protection against real estate fraud and title fraud, which can compromise the property’s title.
All property owners, regardless of the type of property, need title insurance to safeguard their investment.
Benefits of Title Insurance
The advantages of title insurance extend far beyond the initial purchase of your property. Title insurance protects property owners from a variety of title-related issues, including forged documents, unknown title defects, and unpaid contractor bills, all of which can lead to significant financial losses. One of the key benefits is coverage for legal fees and most legal expenses, which can quickly add up if you need to defend your ownership in court. Title insurance also offers gap coverage, protecting you from unexpected issues that may arise during the closing process, before your ownership is fully registered. In addition, title insurance can help facilitate a secure transaction on the closing date, even if formal land title registration is still pending. With title insurance, property owners can rest easy knowing that their property ownership is secure, and that they have a safety net in place for most title related issues. This protection is especially valuable when dealing with complex real estate transactions, as it shields you from the financial impact of title defects and other unforeseen problems.
Why Property Owners Need Title Insurance
Title insurance is an essential safeguard for every property owner, whether you’re purchasing a home or investing in commercial real estate. When you purchase title insurance, you’re protecting yourself from a range of potential risks that could threaten your property ownership. Title insurance covers issues such as title defects, real estate fraud, and undisclosed liens—problems that may not be discovered during the initial title search but can surface later and jeopardize your clear ownership of the property. Without a title insurance policy, property owners could face significant financial losses or costly legal fees to resolve these issues. By purchasing title insurance, you ensure that your interest in the property is protected for as long as you own it. The one-time payment for a title insurance policy offers lasting peace of mind, making it a smart investment for anyone looking to secure their property ownership and avoid unexpected financial setbacks.
Title Insurance Coverage
Title insurance is going to provide coverage for actual losses caused by defects or issues with the legal title to the property. Under a typically Owner’s Policy, title insurance will cover a wide range of issues that arise either before or after the Date of the Policy. This includes coverage for legal fees, and expenses the insurer is obligated to pay under the terms of the policy.
There are certain issues title insurance will cover, which may materialize after the Date of Policy. Some examples include, someone else not listed on the title having an ownership claim or legal interest in the land, issues arising from forgery or impersonation, easements, or the transfer of the title is legally flawed. These are all common issues that title insurance will cover.
Title Insurance will also cover many issues that existed prior to the Date of the Policy but may not have been disclosed. Some examples include, financial claims such as unpaid taxes, mortgages, construction liens, condo fees, court judgements, and local improvement charges. Title insurance protects against existing liens, such as unpaid property taxes or unpaid debts left by the previous owner, which can affect your ownership rights. It also includes coverage against claims made by others based on fraud, coercion, or legal incapacity. Title insurance will also cover retroactive tax charges from before your policy date, outstanding work orders or zoning violations, and the expropriation of all or part of your land.
Title insurance offers broad protection for property owners, covering structural and access issues, such as lack of legal road access, zoning violations, or structures built without permits. It also covers encroachments, building on protected land, easement-related damage, and discrepancies revealed by new surveys. You’re protected if the property wasn’t legally subdivided, if the home sits on the wrong parcel, or if title-related problems cause a buyer or lender to back out. It can also cover breaches of registered agreements, like subdivision contracts. Title insurance bridges the gap between issues missed by lawyers or agents and those not yet recorded in public records, and may even cover certain legal errors. It’s paid as a one-time premium at closing and protects you for the entire ownership period.
Title insurance covers a lot of issues, but it is equally as important to understand what they do not cover. Generally, issues related to government regulations – like restrictions from zoning bylaws, building codes, or environmental protection laws – will not be covered. It will also not cover any loses that may arise from governmental or police powers, or from expropriation, unless notice was registered in the public records before the policy date or the expropriation occurred and was binding before the purchase. While title insurance cover is extensive, it primarily addresses past issues with the property’s title, rather than current or future problems.
Further, any risks that you were aware of, but did not disclose to the insurer, will not be covered. The same applies if you were aware and consented to assume responsibility for the risk. If the risk does not cause actual loss, or if you did not pay market value for the title (i.e. if was a gift) the insurer may decline coverage.
Title insurance will also not cover any environmental issues such as – mould, asbestos, or other environmental hazards. Any issues that may be disclosed in a building inspection or report that could have been obtained before the Date of Policy will also not be covered. Any physical or structural issues that may impact the marketability of the property. It is important to note that home insurance covers physical damage to the property and belongings, while title insurance coverage protects against title-related risks and ownership issues.
There are a number of different title insurance companies willing to offer their services. However, it can get difficult to determine which policy is best suited for your needs. Below is a link to a chart that summarizes what each policy covers. This chart is meant to make your decision easier when choosing the correct policy for you.
Overall, title insurance offers vital protection against many of the unknowns. It does not replace due diligence or proper title search, but it provides a safety net for when something does go wrong. At Olschewski Davie, we want to help our clients understand the scope and limitations of their title insurance as a part of every real estate transaction. If you have any questions about the policy – we’re here to help. Both the property owner and the mortgage lender may require separate title insurance coverage to protect their respective interests in the property.
Different Title Insurances
| COVERAGE | FCT | CHICAGO TITLE | TITLEPLUS |
| Someone else owns an interest in your title (before or after the Date of Policy) | ✓ | ✓ | ✓ |
| Somone else has rights affecting your interest because of leases, contracts, or options (before or after the Date of Policy) | ✓ | ✓ | ✓ |
| Someone else has rights arising from forgery or impersonation (before or after the Date of Policy) | ✓ | ✓ | ✓ |
| Someone else has rights arising from fraud (before or after the Date of Policy) | 🞨 | 🞨 | ✓ |
| Someone else has an easement on your land (before or after the Date of Policy) | ✓ | ✓ | ✓ |
| Somone else has an easement on the land (before or after the Date of Policy) | ✓ | ✓ | ✓ |
| Your title is defective (before or after the Date of Policy) | ✓ | ✓ | ✓ |
| Forgery of an instrument by which someone else claims to own an interest or have a lien on your title | 🞨 | ✓ | 🞨 |
| Document on which title is based is invalid because it was not properly executed, registered or authorized. | ✓ | ✓ | ✓ |
| Someone else has rights to your Title arising from duress, incompetency, or incapacity | ✓ | ✓ | ✓ |
| Someone else has rights to your Title arising from undue influence | 🞨 | 🞨 | ✓ |
| Someone else has rights to your Title arising from fraud, or impersonation | 🞨 | ✓ | 🞨 |
| You do not have actual vehicular and pedestrian assess to your Land | ✓ | ✓ | ✓ |
| Losing your title because of a breach of condition, covenant, or restriction that occurred before your acquired your Title | ✓ | ✓ | ✓ |
| There is a lien on charge on your Title because of a mortgage, judgment, tax, special assessment, public utility, or charge by condominium corporation | ✓ | ✓ | ✓ |
| Government authority assesses supplemental real estate taxes not previously assessed for the Land for before the policy date | ✓ | ✓ | ✓ |
| Lien or charge for local improvement charge that accrued prior to the policy date | ✓ | ✓ | ✓ |
| Charges for public utilities for before the policy date | ✓ | ✓ | ✓ |
| Another person is permitted not to perform a contract, lease, or make a mortgage loan because of: violation of a condition, adverse matters that would have been disclosed by an up-to-date survey, violation of a zoning by-law, your existing structures are located on land under Governmental Authority | ✓ | ✓ | ✓ |
| Your title is unmarketable | ✓ | ✓ | ✓ |
| There are construction, mechanic, or builder liens for services or materials for before the policy date | ✓ | ✓ | ✓ |
| Other people having a right of possession based on family law | ✓ | ✓ | ✓ |
| Violation of local subdivision laws | ✓ | ✓ | ✓ |
| Your land is in violation of a subdivision or developmental agreement | ✓ | ✓ | ✓ |
| You land is in violation of a municipal agreement, agreement regarding a right of re-entry, and agreement regarding common elements registered on your Title | 🞨 | ✓ | ✓ |
| You land is in violation of a utility agreement | 🞨 | 🞨 | ✓ |
| Word orders | ✓ | ✓ | ✓ |
| Notices of violation or deficiency notices | 🞨 | 🞨 | ✓ |
| You are forced by a Governmental authority to remove/fix an existing structure because it was built without getting a building permit | ✓ | ✓ | ✓ |
| You are forced by the owner of the adjoining land to remove or remedy an existing structure (other than a boundary wall/fence) because it encroaches onto neighbouring land or easement, or it violates an existing covenant or condition. | ✓ | ✓ | ✓ |
| You are forced by a Governmental authority to remove/fix an existing structure because it is located on land under the jurisdiction of Governmental Authority, notice of violation, or deficiency notice, or zoning violation. | ✓ | ✓ | ✓ |
| You are forced to remove or remedy an existing structure (other than a boundary wall/fence) because there is an outstanding work order, or an open building permit, | 🞨 | 🞨 | ✓ |
| The existing improvements are damaged because of a future exercise of a right to use the surface of the Land for extraction of minerals, water or other substances. | ✓ | ✓ | ✓ |
| Your existing structures are damaged because of the exercise of a right to maintain or use an easement affecting your land | ✓ | ✓ | ✓ |
| Someone builds a structure (other than a boundary or fence) which encroaches on your land | ✓ | ✓ | ✓ |
| Any adverse circumstances affecting the Land that would have been disclosed by a Local Authority Search | ✓ | ✓ | ✓ |
| Any incorrectness in a written statement by a Governmental Authority indicating that there are no defects relating to the Land and accompanying | ✓ | ✓ | ✓ |
| The residence with the municipal address in the policy is not located on the Land | ✓ | ✓ | ✓ |
| The improvements with the municipal address in the policy are not located on the Land | 🞨 | 🞨 | ✓ |
| Any liens, defects, charges, or encumbrances effecting your Title | ✓ | ✓ | ✓ |
| There is a defect, lien or encumbrance, on your title that was registered in the Public Records after the Policy date but prior to the Title being registered in the Public Records | ✓ | ✓ | 🞨 |
| Someone else has an encumbrance on your Title | 🞨 | ✓ | 🞨 |
| Work orders | 🞨 | ✓ | 🞨 |
| Someone else claims an interest in your land because of a violation of a covenant, condition, or restriction. The violation occurring before you acquire title | 🞨 | ✓ | 🞨 |
| The expropriation of all or part of your land occurring prior to the policy date | ✓ | ✓ | ✓ |
| The invalidity of any easement benefiting your land that is included in your policy | 🞨 | 🞨 | ✓ |
| The inability to use your land as a single-family residential dwelling because it violates a zoning by-law | 🞨 | 🞨 | ✓ |
Legal Services Coverage
| COVERAGE | FCT | CHICAGO TITLE | TITLEPLUS |
| Failure of lawyer to register document required for marketable title, causing you to not be able to enforce the closing of a sale, a lease or mortgage | 🞨 | 🞨 | ✓ |
| Failure of lawyer to remove an encumbrance or lien that exists against the chattel | 🞨 | 🞨 | ✓ |
| Errors or omissions in the Statement of Adjustments | ✓ | ✓ | ✓ |
| Errors or omissions in providing legal services | ✓ | ✓ | ✓ |
| Errors or omissions in the review of the agreement and related documents | ✓ | ✓ | 🞨 |
| Failure to conduct title or off-title searches | ✓ | ✓ | 🞨 |
| Errors made in the opinion provided regarding the title or off-title searches | 🞨 | ✓ | 🞨 |
| Failure to obtain other closing documents required in the written closing instructions | ✓ | ✓ | 🞨 |
| Fraud, theft, dishonesty, or negligence of the lawyer in handling of the funds of the transaction in that it affects your interest in the Land | 🞨 | ✓ | 🞨 |
Exclusions
| NOT COVERED | FCT | CHICAGO TITLE | TITLEPLUS |
| Any by-laws, easements, rights of way, rights of re-entry, covenants, conditions, restrictions, airport zoning regulations, notices, agreements, and exceptions of mineral rights that are registered on Title | ✓ | ✓ | |
| Mortgages agreed to by you | ✓ | ✓ | |
| Assignments of rent, or other financial obligations | ✓ | ||
| Any loss from using the Land as a multi-family residence or the construction of additional dwellings on the Land (if the policy does not contain a multi-family residence endorsement) | ✓ | ||
| Governmental powers and the existence or violation of building or zoning code, land use, improvements, land division or environmental protection | ✓ | ✓ | ✓ |
| Failure of your existing structures to be constructed in accordance with the building codes – does not apply if violations of the building codes were registered in the Public Records at the Date of Policy or disclosed by a Local Authority Search | ✓ | ✓ | ✓ |
| The right to take land by expropriation – unless the notice to expropriate is in the Public Records or if the expropriation happened before the Date of Policy and you had no knowledge of it, but it is binding of you | ✓ | ✓ | ✓ |
| Risks that were created, allowed or agreed to by you | ✓ | ✓ | ✓ |
| Risks that were known by you but not reported to the Company on the date of Policy (unless they are in the Public Records) | ✓ | ✓ | ✓ |
| Risks that result in no loss to you | ✓ | ✓ | ✓ |
| Risks that first affect your title after the Policy Date | ✓ | ✓ | |
| Failure to pay value for your Title | ✓ | ✓ | |
| Lack of a right to land outside the area specified in the Policy | ✓ | ✓ | |
| Lack of a right in streets, lanes or waterways that touch your land | ✓ | ✓ | |
| Environmental issues of any kind | ✓ | ✓ | |
| Matters disclosed in a building inspection or home inspection report obtained by you prior to the Policy Date | ✓ | ✓ | |
| Any Native or Aboriginal land claims affecting your land | ✓ | ||
| Inability to use your land or construct improvements (other than if it’s a single family residence and use is invalid because of a violation of zoning by-laws) |
How Much Does Title Insurance Cost
Title insurance typically involves a one-time fee paid at closing, ranging from $150 to $800.The cost depends on factors like the property’s price and location. Unlike other insurance types, it doesn’t require annual premiums and lasts as long as you own the property. This makes it a cost-effective way to secure long-term protection and peace of mind.
How to Purchase Title Insurance
To purchase title insurance, consult your real estate lawyer or contact a reputable title insurance company directly.
- Choose a provider known for strong customer service and clear, comprehensive coverage.
- Review the policy carefully, understanding what risks are covered and asking questions about exclusions
This ensures you get the right protection for your property.
What to Look for in a Title Insurance Policy
When selecting a title insurance policy, ensure it offers coverage for unknown title defects, unrecorded liens, and forged documents
- Check that the coverage limits are appropriate for your property’s value.
- Review any exclusions to understand what isn’t covered.
- Don’t hesitate to ask the insurer for clarification on policy details.
- A reputable insurance company with clear communication and good customer service is key.
- Understanding your policy helps ensure peace of mind in property ownership.
