About Title Insurance

What on earth is title insurance, and do you need it?

Title insurance gives you financial compensation if you lose money as a result of a problem with title to (ownership of) the home you buy.

Title insurance is almost always used in real estate transactions in the United States, but hardly ever for home purchases in Canada until now. That's partly because land registry records in Canada are more reliable, but it's also because most Canadian clients rely on their lawyer's written certification that there are no problems with title to their new home. If the lawyer turns out to be wrong, the client can sue the lawyer, who is required by law to carry professional liability insurance to pay claims like these.

Do you need title insurance? In most home purchases, the answer is no. In a few rare circumstances it offers greater protection against title problems. And if there turns out to be a problem with your title, it may be simpler to make a claim to an insurance company than to sue the lawyer.

Title insurance is available from private insurance companies, but it's so expensive that it usually make more sense just to rely on your lawyer's certification that you're getting a problem-free title. The Law Society of Upper Canada has a form of title insurance, TitlePlus, which may be a better bet. It's less expensive than private title insurance, and it may allow your lawyer to streamline your house purchase in a way that will reduce your legal bill. In addition, TitlePlus will protect you if you suffer a financial loss because of your lawyer's mistake on a non-title matter, such as giving you wrong advice about the terms of your mortgage. (If something like that happened, you would just make a claim under your insurance policy instead of having to sue your lawyer).

OK, now you're pretty confused about whether to get title insurance. So what should you do?

Your lawyer is required to talk to you about title insurance when you buy a house. Ask:

• Whether having title insurance will gibe you any greater protection against title problems that you already have without it.
• How much the different types of title insurance would cost in your transaction.
• Whether using title insurance will reduce the cost of your transaction.

Compare the total cost of your deal if you get insurance to the total cost of the deal if you don't. If it's cheaper with title insurance, get title insurance. It it's more expensive with title insurance, ask your lawyer whether you are getting enough advantage to make the extra cost worthwhile. Lawyers are not allowed to accept any money from an insurance company for recommending the use of that particular company, so you should be able to trust your lawyer's advice.

For more information about title insurance, ask your lawyer for a copy of the brochure "Working With a Lawyer When You Buy a Home".