Short answer: title insurance is a one-time policy, purchased at closing, that protects against problems with your property's legal ownership, fraud, undisclosed liens, survey errors, and similar issues, that a standard title search doesn't always catch. It's genuinely inexpensive relative to the protection it provides.
What Title Insurance Actually Covers
- Title fraud: someone forging documents to fraudulently transfer or place a mortgage against your property. See our fraud prevention guide for more on how this happens.
- Existing liens or claims not caught during the title search, from unpaid contractor bills to old, unresolved municipal charges.
- Errors in public records, including mistakes in the property's legal description or ownership history.
- Survey and boundary issues, such as an encroachment from a neighbouring property that wasn't previously identified.
- Legal defense costs if your ownership is challenged, in many policies.
Lender's Policy vs. Owner's Policy
A lender's policy protects your lender's financial interest in the property and is essentially always required as part of your financing, you generally don't have a choice about this one. An owner's policy protects your own equity and is optional, but strongly recommended, since the lender's policy alone doesn't protect you personally if a title issue arises.
What It Costs
A one-time premium, commonly a few hundred dollars depending on your property's value, paid once at closing. Unlike home insurance, there's no ongoing renewal, the policy stays in effect for as long as you own the property.
Title Insurance vs. Home Insurance
These cover completely different risks. Home insurance protects the physical structure and contents against damage, fire, water, theft. Title insurance protects your legal ownership of the property itself. You need both, and one doesn't substitute for the other.
Is It Mandatory?
The lender's policy is effectively required as a condition of most mortgage financing. The owner's policy is optional, but given the relatively low one-time cost against the protection it provides, most real estate lawyers recommend it as a default, not an upsell.
Closing Soon?
Ask your lawyer directly about your title insurance options, and if you have questions about how it fits into your closing costs, talk to Sean.