Title Insurance Clarified
Title insurance is growing in popularity in Canada. But many people ask themselves: Should I get it? Is it necessary?
Whether title insurance is appropriate for you is something you should speak with your current lawyer about since it really depends on the circumstances of your transaction.
The information below will help to explain title insurance and how it works so you can make a sound and informed decision:
Prior to your closing date, records attached to your home are “searched” to determine the previous ownership with the property. The lookup might reveal, for example, existing mortgages, liens related to outstanding taxes, etc. that may still be registered against the property. The last thing you want is to move into your new home and realize there are dominant bills or liens that need to be paid that you are NOT responsible for! At closing the customer expects property that’s free of this sort of claims, so normally they should be cleared up before closing.
Title Insurance Explained
Sometimes problems (or defects) regarding title are not discovered before closing on your property, or are not necessarily remedied before closing. These defects can be a headache for you down the road, thus title insurance ensures that you are not held responsible for previous, unethical dealings that may have occurred in and around your home. For example, the survey will often have failed to show that a boating dock was built at a nearby river on your property without specific permission from your community. Another scenario would be if the home was sold to the previous owner illegally or outside of standard process. These are all items that the title insurance covers.
Who Does Title Insurance Protect?
Title insurance protects purchasers and/or loan companies against loss or damage sustained once the purchase is made. Title insurance covers items such as survey problems; forced removal of structures; forgery or even duress; zoning; compliance deficiencies in and around your property, etc. Ensure that you discuss the coverage terms of your title insurance policy with your lawyer so you understand everything.
Length of Title Insurance?
Title insurance is in effect so long as the insured consumer has title for the purchased property/land. Some policies may also protect those that received title due to the purchaser’s death, or certain members of the family (e. g., a spouse or children) to whom the property may be transferred to. The premium pertaining to title insurance can be paid once (at time of purchase). Typically in Canada the purchaser with the property pays to the title insurance, though there are situations where the home seller takes care of the cost. Some policies automatically cover both purchaser and loan provider; others have separate charges for each. In the matter of title insurance protecting a lender, the policy is always in effect so long as the mortgage is always on title. Mortgage lenders usually are covered up for the principal amount with the mortgage.
Protection and Comfort
Title insurance may help ensure that a closing is not delayed to defects in your sale agreement or concept of sale (legal documents). Should an issue arise, title insurance covers all fees and/or expenses that may result as part of the issue(s).
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