What title insurance actually covers
It protects against problems with the property's legal title that weren't caught during the purchase process, such as fraud, forgery, undischarged liens from a previous owner, or errors in the property survey.
Why it matters even with a clean title search
Lawyers do a title search before closing, but some risks, like a fraudulent claim surfacing years later, can't be caught in advance. Title insurance covers you against these issues even after you've owned the home for years.
- Covers fraud and forgery affecting ownership
- Protects against undisclosed liens or encroachments
- Can cover survey errors without needing a new survey
Owner's policy versus lender's policy
Your lender requires their own title insurance policy to protect their interest in the mortgage, but this doesn't protect you as the owner. Buying a separate owner's policy is optional but strongly recommended by most real estate lawyers.
The cost relative to the protection
The premium is a one-time cost paid at closing, and it's generally a small fraction of your total closing costs. Given the potential cost of resolving a title dispute without it, most buyers find it a worthwhile expense.
Frequently asked questions
- Is title insurance mandatory in Ontario?
- Lender's title insurance is generally required by mortgage lenders, while an owner's policy is optional but commonly recommended.
- Does title insurance cover boundary disputes with neighbours?
- Many policies do cover certain survey and boundary issues, though the exact coverage depends on the specific policy purchased.
- How long does the coverage last?
- Most owner's title insurance policies last as long as you own the property, with no need for annual renewal.