What is title insurance and why is it important?
Why Title Insurance Could Save You Thousands — What Is Title Insurance and Why It Matters?
Quick answer: What is title insurance?
Title insurance protects buyers and lenders from hidden property ownership problems that appear after closing. Unlike home insurance that covers damage, title insurance covers legal and financial loss from defects in the title, liens, fraud, or clerical errors.
Clear definition and core coverage
- Title insurance: a one-time premium that underwrites legal defense and loss reimbursement if a title problem surfaces.
- Typical coverage: undisclosed heirs, forged signatures, unpaid taxes or liens, mistakes in public records, boundary disputes, and fraud.
Common title problems buyers and investors face
- Undisclosed liens from contractors or previous mortgages.
- Heirs or former owners claiming ownership.
- Clerical errors in public records.
- Fraudulent transfers or forged documents.
These issues can lead to legal battles, lost equity, and failed deals.
Why title insurance matters for buyers and investors
Buyers: You want certainty. Title insurance gives clear ownership and protects your down payment and equity. Without it, a title defect can erase years of payments.
Investors: Your portfolio depends on clean titles. Title defects reduce resale value, block sales, and create multi-thousand-dollar legal headaches. Title insurance preserves returns and makes properties marketable.
Real estate lenders typically require lender’s title insurance. Buyers should also buy an owner’s title insurance policy to protect their equity and future resale.
How title insurance works — simple and practical
- Title search: A title company searches public records to find issues.
- Title commitment: The company issues a commitment listing exceptions and required fixes.
- Closing and policy: After matters are cleared, you pay a one-time premium and receive a policy that covers covered losses and legal defense.
Real-world example: A homebuyer closed on a property. Years later, a contractor’s unpaid lien from prior work surfaced. With owner’s title insurance, the insurer paid the lien and defended the buyer in court. The buyer kept the property and avoided thousands in legal fees.
How much does it cost?
Costs vary by location and purchase price. It’s typically a fraction of the purchase price as a one-time fee paid at closing. Consider the cost vs. potential loss: paying a little now prevents a large future expense.
Choosing the right policy
- Compare coverage limits, exceptions, and endorsements.
- Ask about extended coverage for boundary, zoning, or survey issues.
- Use a reputable title company with strong claims-paying history.
Why use a local expert
A local real estate and risk expert knows market-specific title issues, common chain-of-title problems, and trusted title companies. Working with a local advisor speeds problem resolution and ensures the right policy for your needs.
If you’re buying or investing in real estate in the GTA and want expert guidance, contact Tony Sousa — trusted local real estate and risk advisor. Email: tony@sousasells.ca • Phone: 416-477-2620 • https://www.sousasells.ca
