For many homebuyers, purchasing property is one of the largest financial decisions they will ever make. Alongside mortgage documents, closing costs, and legal fees, buyers are often introduced to another item on their closing statement: title insurance.
Clients frequently ask whether title insurance is necessary, particularly when a lawyer has already conducted a title search. Understanding what title insurance covers—and what it does not—can help buyers make informed decisions during the closing process.
What Is Title Insurance?
Title insurance is a type of insurance policy that protects property owners and lenders against losses arising from issues affecting title to a property. In Canada, title insurance policies are typically issued by companies such as First Canadian Title, Stewart Title Guaranty Company, and Chicago Title Insurance Company.
Unlike most insurance policies that protect against future events, title insurance primarily protects against unknown issues that already exist at the time the property is purchased but were not discovered during the title search process.
The policy is purchased as a one-time premium at closing and remains in effect for as long as the insured owns the property.
What Does Title Insurance Cover?
Coverage varies depending on the policy, but title insurance commonly protects against the following types of risks:
- Title fraud or identity fraud, such as someone fraudulently selling or mortgaging a property
- Errors in public records, including mistakes in land registry documents
- Undiscovered liens or encumbrances registered against the property
- Boundary or survey issues, such as structures encroaching onto neighboring properties
- Unpaid property taxes or utility liens that were not identified before closing
- Defects in title, including missing signatures or improperly executed documents
In some cases, policies may also cover the legal costs of defending title if a claim arises.
If Lawyers Conduct Title Searches, Why Is Title Insurance Needed?
A real estate lawyer’s title search remains an essential part of the closing process. However, a title search can only reveal issues that appear in public records.
Certain problems may exist that are not discoverable through a standard title search, including:
- Fraudulent or forged documents
- Survey inaccuracies
- Unregistered rights affecting the property
- Administrative or registry errors
Title insurance provides a layer of protection against these types of risks.
In addition, title insurance can simplify certain aspects of the closing process. For example, in some transactions it may eliminate the need for a new survey or allow minor title irregularities to be insured over rather than corrected before closing.
Is Title Insurance Mandatory?
Title insurance is not legally required when purchasing property. However, most mortgage lenders require borrowers to obtain a lender’s title insurance policy as a condition of financing.
This policy protects the lender’s interest in the property not the homeowners. As a result, buyers will often purchase an owner’s policy at the same time to protect their own interest in the property.
What Does Title Insurance Cost?
Title insurance premiums vary depending on the purchase price of the property and the scope of coverage. For most residential transactions, the cost typically ranges from a few hundred dollars to approximately $1,000.
Because it is a one-time cost paid at closing, there are no ongoing premiums.
Is Title Insurance Worth It?
Whether title insurance is necessary ultimately depends on a buyer’s risk tolerance and the specifics of the transaction. Many buyers view the policy as a relatively inexpensive way to protect against potentially significant legal issues that may arise after closing.
For lenders, the policy provides reassurance that their mortgage interest is protected. For homeowners, it can provide peace of mind that unexpected title problems will not result in costly legal disputes.
Final Thoughts
While a thorough title search remains a critical part of any real estate transaction, title insurance serves as an additional safeguard against risks that cannot always be identified before closing.
If you’re purchasing a home and have questions about title insurance and how it protects you, contact our real estate lawyers on (416) 863-0125, they are here to help.
At Mills & Mills LLP, our lawyers regularly help clients with a wide range of legal matters including business law, real estate law, estate law, employment law, health law, and tax law. For over 140 years, we have earned a reputation amongst our peers and clients for quality of service and breadth of knowledge. Contact us online or at (416) 863-0125. The material provided through the Mills & Mills LLP website is for general information purposes only. It is not intended to provide legal advice or opinions of any kind.
2 St Clair Ave West
