Popularity of title insurance is rising in Canada. After hearing title insurance many questions comes to mind, like what is it exactly? Should you get it? Do you need it? You can converse with your lawyer, and ask whether title insurance is applicable to you. This article will give you a detailed idea on title insurance and will help you to make an informed decision.

Title to Property

Title is the authorized term for ownership of property. Purchaser needs "good and marketable" title to a property, where good title means title suitable for the purchaser’s purposes; marketable title means title the purchaser can convey to someone else. Before closing the deal, public records are "searched" to determine the previous possession of the property, along with prior dealings associated with it. These particulars are thoroughly checked. The search might unveil some facts like existing mortgages, liens for unsettled taxes, utility charges, etc., listed against the property. At closing the purchaser expects claim free property, so claims must settle down before closing. For example, the seller’s mortgage should be cleared and all outstanding monetary expenses (such as taxes and utility charges) should be paid (or adjusted) before closing.
 

Who is Protected With Title Insurance?

Title insurance policies can be issued in favor of a purchaser, a lender, or both. Occasionally lenders will need title insurance as a condition of generating the loan. Title insurance defends purchasers and/or lenders against loss or damage sustained if a claim enclosed under the terms of the policy is made.

Various kinds of risks, which are generally enclosed under a title insurance policy are irregularities in survey; existing structures compulsory removal; forgery or duress, claims due to fraud; unregistered easements and rights of-way; lack of vehicular access or pedestrian to the property; work orders; set back non-compliance or deficiencies and zoning, etc. For a risk to be covered, usually it has to occur as of the date of the policy. Native land claims and environmental hazards risks are generally excluded from any type of insurance policy. Be sure to discuss with your lawyer, about risks which are covered and which are excluded.

The insured purchaser is indemnified for actual loss of damage sustained up to the amount of the policy relies on the acquisition price. As well, some policies have inflation coverage, which means with the increase in fair market value of the property, the policy amount will also increase (up to a set maximum).
 

How Long is the Insurance Coverage?

In the situation, where title insurance is covering a purchaser, title insurance remains in sway as long as the insured purchaser has title to the land. Certain policies also defend people who received title as a result of the purchaser's death, or certain family members (e.g., a spouse or children) to whom the property may have been transferred for a nominal consideration.

Another instance where title insurance is covering a lender, as long as the mortgage stays on title the policy remains in effect. A lender covered under a title insurance policy is insured in the event and realizes on its safety and suffers actual loss or damage referred to a risk covered under the policy. They are usually covered up to the principal amount of the mortgage.

The premium for title insurance is paid only once i.e. at the time of purchase. Usually speaking, in Canada the purchaser of the property pays for the title insurance, though there can be conditions where the seller pays for it. Some policies habitually cover both the purchaser and lender; others will cover both for a small additional fee.