You wouldn’t buy a car without insurance — so why skip it for your home’s legal ownership?

Every year, Canadian homeowners run into unexpected (and expensive) title issues: fraudulent claims, old liens, even long-lost heirs challenging their ownership. These problems can cause headaches and cost thousands.

Luckily, that's where title insurance comes in.

In under 7 minutes, you’ll learn:

• What title insurance actually covers (and what it doesn’t)
• The difference between a lender’s policy and an owner’s policy
• How the title search process works and why it matters
• Step-by-step instructions for getting insured before closing day
• How to choose a reputable title insurance provider that won’t leave you hanging if issues arise

Let’s make sure you know what you’re getting!

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What is title insurance?

Title insurance is a type of insurance that protects property owners and lenders from financial loss due to defects in the title of a property. It provides coverage for any potential property ownership issues, such as liens, encumbrances, or other legal disputes.

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When & why is title insurance important?

Title insurance is essential for both buyers and lenders as it safeguards them from any potential financial loss or legal challenges related to the title of a property. It is typically obtained during the process of purchasing or refinancing a property, and can provide peace of mind to all parties involved.

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Types of title insurance

There are two types of title insurance: owner's policy and lender's policy.

Owner's policy

• An owner's policy protects the buyer and their heirs for as long as they own the property.
• It covers any financial losses resulting from undiscovered liens, encumbrances, or ownership disputes.
• The cost of an owner's policy is usually based on the purchase price of the property.

Lender's policy

• A lender's policy protects the mortgage lender's investment in the property.
• Lenders typically require it before approving a loan and only covers the loan amount.
• The cost of a lender's policy is usually based on the loan amount.

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How title insurance works

The process begins by thoroughly searching public records to uncover any potential issues with the property's title. This includes reviewing:

• Deeds 
• Mortgages 
• Wills 
• Divorce settlements 
• Court judgments 
• Tax records

Any problems found during this search process must be addressed and resolved before the title can be insured.

Once a title insurance policy is issued, it remains in effect as long as the owner or their heirs have an interest in the property. This means that if any issues arise with the title in the future, the policy will protect the owner from financial loss.

Title insurance also protects against fraudulent claims on the property's title. For example, if someone forged a signature on a deed and tried to sell the property without the true owner's knowledge, title insurance would cover legal fees and any financial losses.

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How to get title insurance, step by step

#1. Initiate the title search process

Part of the real estate transaction, this process involves examining public records to verify the property's ownership history and identify any issues, such as liens, unpaid taxes, or conflicting ownership claims.

#2. Choose a title insurance provider

Select a reputable title insurance company (this responsibility may also fall to your lawyer, as it often does). You can get recommendations from your real estate agent, lender, or attorney. Ensure the provider is licensed and well-reviewed.

#3. Resolve any title issues

If the title search uncovers any problems, these must be addressed before closing. Your title insurance company or attorney will work to resolve these issues, ensuring the title is clear and marketable.

#4. Review the preliminary title report

After the title search, the title company will provide a preliminary title report. This document outlines any findings and ensures that the buyer, seller, and lender agree on the state of the title before closing.

#5. Pay for the title insurance

Title insurance is typically a one-time payment made during the closing process. The cost may vary depending on the property's value and the specifics of the policy.

#6. Receive the title insurance policy

You will receive your title insurance policy once payment is made and the transaction is complete. Keep this document in a safe place, as it serves as proof of your coverage in case of future disputes. It is also a good idea to review the policy carefully and ask any questions you may have.

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Requirements for title insurance coverage (+ what's included)

To obtain title insurance coverage, specific requirements must be met:

• First, the title search (covered previously).
• Additionally, the policyholder (you) must complete the necessary paperwork and payment for the premium before the policy is issued.

A standard title insurance policy typically includes protection against issues such as:

• Undisclosed heirs of the previous owner
• Forged documents 
• Coverage for legal defense costs in the event of a challenge to the title
• Errors in public records that could affect ownership rights

However, the specifics of what is included and excluded in a policy may depend on the type of policy chosen—owner’s or lender’s—and the terms agreed upon during the transaction. Always review the policy to ensure it meets your specific needs.

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How to choose a title insurance company (criteria)

When selecting a title insurance company, it is essential to consider several factors to ensure you are making an informed decision:

• Company reputation: It is crucial to research the reputation of the title insurance company before proceeding with a transaction. Look for reviews and ratings from previous clients, as well as any history of complaints or legal issues.
• Experience and expertise: Choose a company that has been in the title insurance industry for several years and has extensive experience handling similar transactions. This will ensure they have the necessary knowledge and skills to identify issues and provide efficient solutions.
• Financial stability: The financial stability of a title insurance company is critical for protecting your investment. Make sure to inquire about their financial standing and ask for proof, such as audited financial statements.
• Customer service: A good title insurance company should have excellent customer service. This means being responsive, communicative, and addressing any concerns you may have promptly.
• Claims process: In the unfortunate event that an issue arises with your property title, it's essential to understand the claims process of your title insurance company. Ask about their policies and procedures for handling claims and how long it typically takes to resolve them.
• Coverage options: Different title insurance companies offer various coverage options. Carefully review what is covered under each policy and choose one that fits your specific needs. While most policies provide basic protection against issues such as title defects or liens, some may also offer additional coverage for things like zoning violations or easement disputes.

Since title insurance is usually purchased right when you buy a property, it's understandable if you simply want to get it over with — but don't rush this decision. Take the time to understand your policy and ask questions if you're unsure about any aspect of it.

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Start your homeownership journey hassle-free

Let's quickly review what we've covered here:

• Title insurance protects property owners and lenders from financial loss due to title defects, like liens or forged documents. It’s typically purchased during a real estate transaction and remains in effect as long as you own the home.
• There are two types of title insurance: one for lenders and one for owners. Owner’s policies cover your equity in the property, while lenders’ policies protect only the mortgage amount.
• Choosing the right provider means checking for solid reviews, financial stability, and transparent claims processes. Don’t rush the purchase! Compare coverage options and make sure your policy addresses your specific needs.

Now, you have all the information you need to protect your new home with title insurance.  Remember, it’s always better to be safe than sorry when it comes to one of the biggest investments in your life. And with title insurance, you can rest easy knowing your ownership rights are protected.

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Frequently asked questions

How much does title insurance cost in Canada?

The cost of title insurance varies depending on the value of your property and where you live in Canada. Generally, it can range from a few hundred to a thousand dollars. It is vital to shop around and compare prices from different companies.

Is title insurance mandatory in Canada?

No, title insurance is not mandatory in Canada. However, many lenders will require it as part of their mortgage requirements.

Can I purchase title insurance after buying a home?

You should purchase it while closing on the sale to ensure maximum protection, but yes, you can buy title insurance after closing on a property in Canada. This is known as "existing owner coverage" or an "existing homeowner’s policy."

What is generally covered by title insurance?

Title insurance typically covers issues such as fraud, forgery, and other hidden defects that may arise with the property's title.  It can also cover legal fees and potential losses in case of a dispute over the property's ownership.

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