Title Insurance in Canada: What It Covers and When You Need It

What Is Title Insurance?

Title insurance is a policy that can protect you against certain problems with the ownership (title) of your property. Unlike home insurance, which covers future events such as fires or break-ins, title insurance is aimed at problems that already exist when you buy the property but that nobody has found yet.

Your real estate lawyer searches the land registry before closing for mortgage charges, easements and ownership history. That search catches many problems, but some issues may not appear in the registry. For example, a previous owner may have forged documents, or a survey may show that a neighbour's fence sits on the property.

A title insurance policy may pay for certain covered losses. The policy wording sets out what is covered and what is excluded.

Two Types of Policies

There are two distinct title insurance policies, and they protect different parties:

• Lender's policy: Protects your mortgage lender against title defects. Many lenders ask for this as a condition of mortgage approval. The borrower usually pays the premium.
• Owner's policy: Protects you, the owner, against certain title defects. Whether to buy one is your decision. Ask your lawyer whether it suits your purchase.

Your lawyer can tell you which policies are being bought for your purchase and what each one covers.

What Title Insurance May Cover

Coverage depends on the policy. The examples below are the kinds of risks a policy may address. Read your own policy wording and ask your lawyer to explain the exclusions before closing.

• Title fraud or forgery, such as someone forging a signature to sell or mortgage a property
• Errors in public records or the land registry
• Registered charges or encumbrances that were not found in the search

Some policies exclude matters you already knew about, matters that arise after the policy date, and building or environmental issues. The exclusions in your own policy control.

Ontario has a government fund for people who lose money through real estate fraud or land registry errors, the Land Titles Assurance Fund. Applications must be made within six years of the loss. For most straightforward fraud cases, the government says a decision on compensation can be made within three months. Title insurance is a separate private product with its own terms, so ask your lawyer how the two compare.^[1][2]

What Affects the Cost

This article does not list premium figures. Premiums vary by purchase price, the type of property, the policy types you buy and the insurer, and they change over time.

Ask your lawyer or the insurer for a quote for your transaction. Premiums are usually paid once at closing.

If you refinance, a new lender may ask for its own policy. Ask your lender what it requires.

Title Insurance vs. a Survey or Real Property Report

Buyers often ask whether title insurance replaces a survey. The two do different jobs.

• Title insurance is a policy that may pay for covered losses. It does not show where the property boundaries are.
• A survey or real property report is a document showing the property's boundaries and structures as they were surveyed. It can be useful if you plan future work such as an addition, a pool or a fence. Ask your lawyer and your municipality what they require for that work.

Some buyers get a survey after closing as well. Whether that makes sense depends on the property and your budget.

When Title Insurance May Be Needed

Ontario government guidance on fraud compensation suggests discussing title insurance with your lawyer. Whether you need it depends on your lender, your transaction and your lawyer's advice.^[1]

Lender requirement

Many lenders ask for either a lender's title insurance policy or a current survey before they fund a mortgage. Each lender sets its own rules, so ask early. Whether you go through a bank, a credit union or a mortgage broker, confirm the lender's requirements in writing.

No existing survey

If the seller does not have a recent survey, your lender may ask for another way to confirm the property. Title insurance is one option. Ordering a new survey can take time and may affect your closing date.

Cash purchases

If you are buying without a mortgage, no lender is reviewing the title on your behalf. Ask your lawyer whether an owner's policy makes sense for your purchase.

Refinancing

A new lender may require its own policy when you refinance, even if the previous lender had one. Ask your lender what it requires.

Providers Named in Canada

The insurers below are examples of companies that offer title insurance in Canada. This article does not rank them. Your lawyer usually chooses the insurer for your transaction.

• FCT (First Canadian Title): A title insurer based in Oakville, Ontario.^[3]
• Chicago Title Canada: Offers title insurance solutions for Canadian transactions.^[4]

Policy terms can differ between insurers. Ask your lawyer which insurer they use and why.

Commercial properties have their own title issues. If you are buying commercial property, speak to your lawyer early.

How Claims Generally Work

If a title issue comes up after closing, contact the insurer named in your policy and provide the documents you have. Check your policy for how and when you must give notice, because a delay may affect your coverage. Keep your policy documents in a safe place. Your lawyer should provide a copy at closing.

Whether a claim is covered depends on the policy. Hypothetical examples:

• A neighbour says your garage sits on their land. A claim may involve a survey, legal costs and possibly a settlement, depending on the policy.
• A municipality issues a work order for unpermitted work done by a previous owner. Whether the policy pays for the fix depends on its terms.
• An unknown mortgage charge appears on title. The insurer may be able to help with discharging it, depending on the policy.