Area of Law: Services for Lawyers and Paralegals
Answer # 926
Title insuranceRegion: Ontario Answer # 926
Title insurance is an option for home buyer’s who seek additional protection when purchasing a home. Buyers can pay an insurance premium which will compensate them if there is a problem with the title including zoning problems or ownership issues. When they purchase title insurance, buyers will usually receive reduced legal and document searching costs.
Lawyers perform a number of administrative searches to ensure that buyers do in fact receive full legal title when they purchase homes. Title insurance is an alternative to conducting all these searches. The benefit of title insurance is the reduced cost for buyers arising from the elimination of a number of administrative searches.
Though title insurance provides protection for home buyers, there are two reasons why a lawyer is still required. First, title insurance policies can only be obtained through a lawyer, and not directly by buyers. Second, title insurance policies provide varying amounts of protection and coverage, and never cover all possible risks associated with buying a home. Generally, they only provide buyers with protection against risks such as zoning problems, major outstanding work orders against the property, and problems that a survey would reveal.
Title insurance for those who own their homes and have paid the mortgage
It is interesting to note that many people who already own their homes and have paid off their mortgage are now buying title insurance as a means to safeguard themselves against title fraud. This occurs when fraudsters purport to be the owner of a property, or using stolen personal information of the real owner, transfer ownership to themselves. After doing this, the fraudsters then take out a mortgage loan on the property and abscond with the money. This tends to happen in cases where there is no existing mortgage on the property because it is easier to get a first mortgage from the bank.
With title insurance, because it is an insurance product, it is not necessary for the policyholder to prove negligence. This means that, in most cases, if a loss is suffered, the homeowner will not have to go to court and will be reimbursed relatively quickly.
The cost of title insurance varies depending on the value of the property and the insurance company used, but generally costs about $300 – $500. The cost of title insurance to the purchaser is usually offset by reduced search fees.
For more information, view the Insurance Law topic 2714 Title Insurance.
Title insurance can be purchased from a number of licensed providers.
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