Why Title Insurance is Essential When You Buy a Home

You know about home insurance -- but what about title insurance? This usually incurs a one-time premium cost but protects against various perils that affect your clear ownership of your home. It may seem like an unnecessary add-on to your home purchase price, but it can bring you real value. Here's what title insurance covers and when you might need it.

What is Title Insurance?

When you purchase a home, you're actually buying title -- that's your right to own the property. But various factors can put a glitch in that process. That means sometimes, your title is up for debate or challenge. That obviously creates a great risk when your financial life may be heavily invested in that one asset. Title insurance cushions the financial risk in case there are flaws in your title, as a result of very specific instances.

What Does Title Insurance Cover?

Title insurance varies from province-to-province. In addition, you may have different coverage options offered by the title insurance company. In Ontario, the policy may cover you in the event of zoning issues, outstanding liens, survey errors, fraud, or lawyer errors. But it's important to note that this coverage is usually only valid for title risks previously unknown. So, if you bought a property knowing there were zoning issues, for example, you may not be able to rely on insurance to make up for the financial loss. If you knowingly violate zoning regulations in a way that affects your title, you might not receive protection. Other risks covered may include the time period between your sale closing date and the registration of title with a government authority, and big-ticket projects like removing a part of the building that crosses a boundary into the neighbouring property. As with any insurance, it's important to read the policy. In the case of title insurance, the details may be hard to unpack without the help of a lawyer.

Who's Covered By Title Insurance?

Title insurance is not always mandatory, but it's a good idea. According to the Insurance Bureau of Canada, title insurance is usually bought with a one-time premium when you buy your home. You can potentially transfer the title coverage to heirs who may inherit the home if you follow certain conditions. Although you may think of title insurance as "your" policy, it may in fact protect your lender if you have a mortgage or other financing. If title insurance is offered as part of a package when you buy a property, probe a little bit deeper for the details. That way, you'll have a heads up as to how things will work if there is a defect in the title that needs resolution.

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There's a lot to think about when you buy a home. You don't need to just rely on the experts to get the latest information. Kanetix.ca

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