Any homeowner knows the importance of having their home insured against loss or damage. However, there’s another type of insurance that can be of assistance as well. During a real estate transaction, the title of a home or legal ownership is searched by a title company. Once clear ownership is established, a title is issued so that the purchase can proceed. Here’s what you need to know about title insurance for your home - the basics and the benefits.
Definition of title insurance
This form of insurance policy protects property owners and their mortgage lenders from any losses related to the title or ownership of the property. It is an additional type of protection that begins during the real estate transaction process and remains in effect for a long as you own the home. For example, in the unfortunate situation where you buy a home and the seller is committing fraud in selling it, title insurance provides a safety net.
Types of title insurance
There are two different types of title insurance. One kind protects the mortgage holder and the other safeguards the new homeowner. Most banks and mortgage companies will require you to purchase title insurance to protect them in case the seller didn’t have the legal right to transfer the ownership, or there are any liens against the property or unrecorded access rights. Title insurance to protect the buyer against any irregularities in the title or legal ownership is optional and something that the seller may have in place to attract buyers.
What is covered
Make sure that you know what is covered by the title insurance for your new home. Here are the financial losses that are typically protected:
- Fraudster claiming to be the homeowner.
- Municipal zoning by-law violations.
- Building permits not obtained for the property.
- Any liens against the title such as unpaid property tax and utility bills or outstanding mortgage payments from the last owner.
- Survey and public record errors.
- Title defects that may impact your ownership when you come to sell your home like access rights to the property.
What is not covered
If you’re not clear about what the insurance doesn’t cover, ask questions until you understand since this does vary somewhat between policies. Following are examples of what is normally not covered:
- Indigenous land claims.
- Municipal zoning by-law or building permit violations that you subsequently created.
- Title defects you were aware of before buying your home.
- Matters discovered after the purchase by a new property inspection or land survey.
- Unrecorded liens and encroachments that are not part of the public record.
The benefits
Alberta law doesn’t require you to have title insurance in place. However, as you can see from what title insurance is and what it covers, there can be considerable protection in this product. Make sure that you know what coverage options there are and whether it’s advisable to buy additional coverage. The cost for title insurance is usually several hundred dollars and will vary somewhat depending on the property’s value.
The purchase is a one-time event and may even still cover the property if it’s passed on to an heir after your death. Be aware that homes in foreclosure could have some outstanding issues that impact the title of the property so title insurance may be particularly beneficial. In Alberta, the Torrens System is used to register land title and the Province guarantees your property’s title. Even so, title insurance can provide additional protection and peace of mind.
For more information, take a look at The Real Estate Council of Alberta website. If you’re considering purchasing title insurance, I can be of help in recommending several real estate lawyers.
Alberta law doesn’t require you to have title insurance in place. However, as you can see from what title insurance is and what it covers, there can be considerable protection in this product. Make sure that you know what coverage options there are and whether it’s advisable to buy additional coverage. The cost for title insurance is usually several hundred dollars and will vary somewhat depending on the property’s value.
The purchase is a one-time event and may even still cover the property if it’s passed on to an heir after your death. Be aware that homes in foreclosure could have some outstanding issues that impact the title of the property so title insurance may be particularly beneficial. In Alberta, the Torrens System is used to register land title and the Province guarantees your property’s title. Even so, title insurance can provide additional protection and peace of mind.
For more information, take a look at The Real Estate Council of Alberta website. If you’re considering purchasing title insurance, I can be of help in recommending several real estate lawyers.
