You may have noticed more and more stories circulating in the news these days about someone having their home stolen by impersonators. In some cases, they go away for vacation and come home to find strangers living in their home, and in others, supposed buyers appear on their doorstep one day claiming they purchased the home from abroad.

Can you imagine this happening to you? The truth is it can happen to just about anyone, but there are safeguards which can be put in place to protect you. So, let’s talk about title insurance—a topic that may sound a bit boring at first, but we’re going to delve into why title insurance is so important for homebuyers in Ontario, and what many existing homeowners might not realize about their policy.

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What’s title insurance?

Think of title insurance as a magical shield that protects you from potential property ownership nightmares. When you buy a home, you want to be confident that you are the rightful and sole owner, free from any hidden claims or past issues.

Title insurance does just that; it safeguards your ownership rights by covering potential problems related to the property’s title (a document that shows legal ownership to a property) or ownership history. From pesky liens and encumbrances to fraudulent claims, title insurance has your back, giving you peace of mind about what is likely the largest investment you will make in your life.

Why do you need title insurance?

Why title insurance is so important for homebuyers? Title insurance acts as a safety net, catching those overlooked problems and protecting you from financial losses. The best part is that it’s a one-time payment, usually made during the closing process, unlike other insurance policies!

Another benefit that most don’t realize is that it covers you both as the buyer, and future seller. Continue reading to learn why.

What does it cover?

Here are some common problems that title insurance typically addresses and why title insurance is so important for homebuyers:

  1. Forgery and Fraud: If someone impersonates you or improperly transfers ownership without your knowledge, title insurance has you covered.
  2. Encroachments and Boundary Issues: Imagine finding out that your newly purchased dream backyard is technically your neighbour’s property. Title insurance helps sort out these boundary disputes.
  3. Liens and Debts: Did the previous owner fail to pay their utility bills or property taxes? No sweat—title insurance protects you from these financial burdens.
  4. Errors in Public Records: Mistakes can happen in public records, leading to ownership discrepancies. Title insurance takes care of such blunders.

Title insurance covers you as both buyer and seller. So, if you buy a home today with title insurance, and a month after you move in you find out it was sold fraudulently, while you will likely need to give the home up to the true owner, all your expenses and legal fees will be covered by title insurance. In this same scenario, if the true owner held a current title insurance policy on the property, all their expenses and legal fees would also be covered by their title insurance.

Learn more about buying and selling real estate with these blog posts:

What title insurance does not cover

  • Known title defects (known to you before you purchased your property)
  • Environmental hazards (e.g. soil contamination)
  • Native land claims
  • Problems only discovered by a new survey or inspection of your property. For example, the property is smaller than originally thought
  • Issues that were not listed in public records, such as unrecorded liens and encroachments
  • Zoning bylaw violations from changes, renovations or additions to your property or land
  • Title insurance does not provide compensation for non title-related issues

For an additional fee, some title insurance companies may offer protection from additional risks that a standard title insurance policy may not cover:

  • Identity theft
  • Certain known title defects

What most people don’t know about title insurance

Typically, title insurance is available with the purchase of your next home, however, even homeowners who have held title for years can be at risk.

  • If you purchased your home before 1998 you likely do not have title insurance, as it was not common practice before the late 90’s.

    Luckily, you can purchase a new policy today on an existing property you already own, by providing an insurance provider with a current Opinion of Value from a Real Estate Agent.

The cost of title insurance for a detached home is approximately $1 for every $1,000 in value. So, a home valued at $1,000,000 will cost close to $1,000, and this is a one-time payment, with no monthly or annual premiums.

  • If you purchased title insurance before about 2008, your policy may only cover up to 200% of the value at the time the policy was purchased.

    This means that if you purchased your home in 2004 for $400,000, you’re only covered for $800,000. Looking at the spike in home prices over the last 5 or so years, and depending on where you live, that home is now likely valued at over $1 million—but you will not be covered for that full amount.

    To remedy this, most Real Estate Lawyers now include a “fair market value” rider in new policies which basically states that you will be covered for whatever the market value of the home is at the time the policy is used. The good news for those who fall into this bucket, is that you can pay your title insurance provider today to increase your coverage.

A small tip for those who have paid off their mortgage and own their homes outright: if you don’t have title insurance in place, consider putting a secured line of credit against your property, for even a small amount, as that will show something registered against the title of your property which makes it somewhat harder to commit title fraud. Or, better yet, look into a title insurance policy to protect you.

So, what now?

Whether you’re buying your first cozy condo in Toronto, a charming cottage in Muskoka, or even if you’ve owned your home for 50 years, title insurance is your secret weapon for safeguarding your largest investment.

A professional Real Estate Agent can help guide you towards the resources you need to make sure your investment is secure. We at the Lisa Hartsink Team understand why title insurance is so important for homebuyers, and work with several trusted and experienced Real Estate Lawyers.

We are happy to provide referrals to get you on track, just give us a call at 905.873.9944 or email info@lisahartsink.com.