Title Insurance Policies and Their Premiums
Every homebuyer almost always asks about title insurance, even if it’s not their first time purchasing a property. This is likely because they haven’t dealt with title insurance until their lawyer explains it to them. In this blog post, we will explain the purpose of title insurance. We will then discuss the two types of policies that are offered by title insurance companies and their premiums.
What Is Title and Why Does It Need to Be Insured?
Title is a legal term that describes details of the ownership of a property as it is registered. All privately owned real estate properties in Canada and their encumbrances are registered—this is how the government keeps records of these properties. Each province administers its own system for the registration of title.
Title insurance is a product that protects you against problems related to title to your home (coverages include encroachment issues, title fraud, existing liens against the property). Your lawyer must order your title insurance policy on your behalf because they will be communicating your property information to the title insurer and conducting due diligence on your behalf in order to process the order.
For a basic residential home purchase, title insurance offers two types of policies: 1) homeowner policy, and 2) lender policy.
Homeowner Policy
As a homebuyer, you will pay a one-time premium for a homeowner policy that is valid for the entire time you own your property. The amount of the premium depends on the value of the property being purchased.
Lender Policy
If the homebuyer has arranged for financing, the lender will also likely require for the homebuyer to purchase a title insurance policy for the lender. The lender policy protects the lender (not the homebuyer/borrower) for the principal amount of the mortgage. The homebuyer pays a one-time premium for the lender policy, which is valid until the mortgage is fully paid off and discharged.
To learn more about what types of coverage are provided by title insurance policies, visit our blog post here. Your lawyer is your point of contact with title insurers, so if you have any further questions about title insurance, be sure to contact a real estate lawyer.
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