Every home comes with a title. The title is the document that gives you legal ownership of a property. If the title isn’t free, clear, and transferred to you properly then you don’t own the home.
Title insurance protects you in the event that a problem with a title causes you some sort of loss. For example, if the title isn’t free and clear when you take possession of the property then someone can come and take that property away from you. That financial loss would be on your shoulders if you don’t have a title insurance policy.
Theoretically your real estate lawyer researches your title and makes sure it’s clear of defects, but mistakes do happen. Title insurance is just one more step in a responsible home purchase.
Why do you need title insurance?
Title insurance protects you when:
- There are problems with zoning and building permits that causes a significant loss. For example, if the previous owner built without a permit title insurance will cover the costs of correcting the problem.
- When there’s a lien on the title generated by the previous owner.
- When errors in surveys and public records threaten your free, clear ownership of the property.When you discover title defects which make it difficult to sell, lease, or mortgage your property later.
- When you uncover some sort of real estate fraud that impacts your property ownership.
- Your attorney makes some sort of error or omission in regards to title risk.
- When missing or undisclosed heirs cause title defects.
It also protects you during the gap period between the closing and the official registration of the title with the government, ensuring that you’re covered should some sort of problem occur during this process.
What is title fraud?
The Canadian Government defines title fraud this way:
“Title fraud (or real estate title fraud) is a form of real estate fraud that harms individual homeowners and their lenders. Title fraud typically involves a fraudster using stolen personal information, or forged documents, to transfer your home’s title to him/herself (or an accomplice) without your knowledge. The fraudster then gets a mortgage on your home and disappears with the money.” -Understanding Title Insurance
Now you’ve got a problem: someone else looks like they own your home on paper, and they’ve clouded the title with a big mortgage that they’re never going to pay off. Title insurance protects you, allowing you to clear up this issue.
What is the cost of title insurance in Alberta?
Title insurance is reasonably affordable. It’s based primarily on the value of your home. In Alberta, the average cost is $275 or so.
You may require multiple policies:
- A policy for your mortgage lender.
- A policy for you, the buyer of the property.
Often, you get a discount on the mortgage policy if you have your own policy.
You generally pay for title insurance at closing. Yet you can also obtain a policy at any time so long as you own the property. Your attorney can advise you on your coverage options.
Commercial title insurance policies do exist.
How is the cost of title insurance determined?
Insurance companies calculate the cost by multiplying the purchase price of your home by the rate per thousand that the company uses. Every company uses different rates, but in Alberta premiums are typically quite reasonable.
Are title insurance fees negotiable?
In Alberta title insurance rates are low enough that they aren’t usually negotiable in and of themselves. Sometimes you can negotiate with the seller to have them pay your title insurance.
What does title insurance actually cover?
Title insurance covers all losses (up to the policy limits) related to title problems and title fraud, as well as any legal fees you may incur trying to solve those problems. You may have to go to court to defend your interest in the property, for example. Title insurance covers all of those litigation costs, which can be quite prohibitive for the average person.
Some policies have additional identity theft coverage.
What does title insurance not cover?
Title insurance won’t help you if you knew about a flaw in a title and took possession of the home anyway. They also can’t help when:
- There’s a native land claim.
- The issues only arise after a new survey or inspection.
- There are problems, but they didn’t enter the public record.
- When you yourself created the title problem.
- You discover environmental hazards that create an issue with the title.
These are called exclusions to your title insurance policy. In addition your own policy may have other exclusions which you’d be wise to familiarize yourself with.
Title insurance also doesn’t cover any of the issues typically covered by homeowner’s insurance, such as damages due to fire, flooding, sewer back up, general wear and tear, theft, or other losses.
What is the benefit of title insurance?
What is title insurance good for?
You’ll be covered for losses up to the value of the policy, which typically would be a match for the purchase price of the home. You can use this money to clear up title issues that threaten your home ownership, or, worst case, to purchase a new home if you need one.
Is title insurance a rip-off?
No, but you may become the victim of a real estate scam without it. Many people don’t like it simply because the chances you’ll need to use it are relatively slim. Yet if you need it, you’ll really need it.
How often do you need to renew your real estate title policy?
Is title insurance a one-time cost?
As it happens, it is. It will cover you for the entire time you own the property. The policy even can cover heirs when the property passes to them upon your death.
Do I need title insurance for a condo?
It is wise to purchase title insurance for any property you buy.
How to Purchase a Good Title Insurance Policy
First and foremost read the policy on offer to make sure you’ll get insurance up to the full value of your property. Then check the effective date: you want it to be the date of your closing.
Your lawyer should review your policy to ensure it correctly describes the property you’re purchasing.
Finally, when comparing policies compare exclusions, policy limits, and the full list of losses that the insurance will cover.
How do you make a title insurance claim?
To make a claim, contact your title insurance company or agent just like you would with any other insurance company.
Is title insurance mandatory in Alberta?
While your lender may require title insurance, Alberta law does not. You do without it at your own risk.