Title Insurance Explained

What is Title Insurance

Title insurance is an insurance policy that is paid for by the purchasers of a property, to protect the buyers AND the lender’s interests against losses that may arise with respect to the property’s title or ownership. Even though, in Alberta, we use the Torrens System to register title, mistakes can happen. Title insurance protects against these mistakes. It is very important that you have an experience Real Estate Lawyer when you close your Real Estate transaction, but title insurance protects you in the small percentage chance there is an issue with the title between the time you sign at the lawyer and the time of funding.

What does Title Insurance Cover?

Title insurance operates on a no-fault basis. “No-fault insurance” means that the insurance company indemnifies the policy holder for losses, regardless of fault in the incident. Every Title insurance policy is different, but here are a few examples that are likely to be found in every title insurance policy:

• Gap Insurance, which means their interest is protected from the time they sign at the lawyers until the time the title is actually registered in their name. At certain times of the year this can be a major risk. At the time of writing this blog, land titles in Alberta is 8 weeks behind! 8 weeks leave a huge window for issues to occur.
• Fraudulent real estate transactions
• Municipal zoning by-laws and building permit issues
• Existing liens, for example, unpaid utility, mortgage, condo charges, and property taxes from the previous owner;
• Issues that would not show up in your Real Property Report
• Unknown title defects that prevent you from having clear ownership of the property which may impact your ability to sell, lease or mortgage your property in the future.
• Someone other than the home owner having interest (i.e. a previous owner of the property not being properly discharged from title)

There is no substitute for an experienced Real Estate team. Although title insurance is effective, and very necessary in today’s market, an experienced Realtor, Lawyer and Mortgage broker are your best tools to make sure that your property investment is sound and well protected from any issues that may arise.