What is Title Insurance?
Title insurance is a contract of insurance between the insured and the title
insurance company. In return for payment of a one-time premium, the title
insurance company agrees to defend the insured from future losses arising
because of defects or events that occurred prior to the time the policy was
issued. In addition to the coverage for loss, title insurance policies provide
a separate Duty to Defend the insured. The amount of coverage is based on the
face value of the policy and may increase according to the terms of the policy.
The issuance of title insurance is not merely guess work, nor is it a wager. It
is based upon careful examination of the official records of land titles, and
the judgmental decisions made by skilled title examiners. How many types of
Title Insurance policies are available?
There are two main types of title policies. (1) Owner’s title policies,
which insure against loss to the owner of the property and (2) Lender’s
title policies, which insure the holder of a mortgage that the mortgage is a
valid and enforceable charge against the property. There are different policies
for residential and commercial transactions.
Residential Transactions
What protection does the residential Owner’s title policy provide?
A residential Owner’s policy protects the insured owner for as long as
they have an interest in the property against a number of risks including the
following:
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The unmarketability of the Land
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Lack of a right of access
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Someone else has an interest in the title
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A document is not properly signed, sealed or delivered
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Forgery, Fraud, duress, incompetence or impersonation
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Future frauds and forgeries affecting title
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Defective registration of a document
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Restrictive covenants limiting the use of the Land
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Liens arising from mortgages, taxes, utilities, judgements or condominium
charges
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Builders’ Liens
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Rights of possession arising from leases, options, family law or homestead
rights
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Easements over the Land
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Enforced removal of existing structures because they encroach onto adjoining
land or easements, or because they violate municipal by-laws
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The house cannot be used as a single family residence because it violates a
restriction or zoning by-law
How are residential Lender’s policies different from residential
Owner’s policies?
A residential Lender’s interest in land is different than that of an
owner and the Lender’s policy reflects that difference. In addition,
Lender’s policies contain broader coverage than Owner’s policies,
most notably for coverage that occurs after the policy date.
Is Title Insurance just like any other insurance?
Title insurance is unique in that it insures against loss from matters that
happened in the past, whereas other forms of insurance insure against loss from
events that may happen in the future. For example, if an insured suffers loss
because it is determined after closing that a portion of the house encroaches
onto an easement, this is a situation where the issue that created the loss
took place in the past.
How does the title company decide whether to insure a transaction?
Before issuing a title policy, a careful search is made of the title to the land and
other records that affect real estate. Based upon the results of these
examinations, the title company decides whether to issue a policy.
Can anyone get title insurance on any property?
Title insurance is generally ordered through a lawyer or notary in conjunction
with a real estate mortgage or purchase. While most properties qualify, your
lawyer or notary will be able to advise you whether your transaction will be
eligible.
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