Title Insurance Committee Members:
What is Title Insurance?
Title insurance is a form of consumer protection benefiting residential and commercial property owners and their lenders. The policy protects their interests in property by indemnifying against loss that may be suffered if title is other than as stated in the policy. It also provides insurance in respect of several other title defects, such as access to the property, marketability and various municipal issues.
More importantly, it also provides protection with respect to some known/unknown off-title problems, defects, liens or encumbrances before the date of the title insurance policy or that are not identified by the lawyer or notary and divulged to the client. Some future events are also covered for residential policy holders, the most significant of which are fraud and certain encroachments and building permit issues.
Benefits of Title Insurance
Residential title insurance indemnifies the insured against losses incurred in rectifying title defects, and defects that would have been revealed by an up-to-date survey, report on title, zoning memorandum or compliance certificate. The primary non-insurance alternative to title insurance is a legal opinion, which is the traditional method of assuring title to property. Adding title insurance protects a homeowner’s and a lender’s investment against the possibility of real estate fraud, and other challenges to title that are beyond a lawyer’s or notary’s control.
Specifically title insurance may:
- Eliminate the need for many costly off title searches;
- Eliminate the requirement for an up-to-date survey in most circumstances;
- Ensure a fast, less costly closing;
- Reduce risk;
- Simplify the closing process;
- Reduce the lawyer’s/notary’s time per file, saving the client money;
- Insure over some known defects;
- Insure over the registration “gap” so that transactions can close on time without confirmation of registration of the new ownership and mortgage,
- Encourage the correction of title defects by clients, contributing to the preservation of the land title registry and,
- Confer additional legal protection to owners and lenders that is complementary to those opinions given by legal advisors.
Types of Title Insurance
Title insurers may offer a number of different types of title insurance policies:
- Policies for new homeowners;
- Policies for existing homeowners;
- Policies for purchasers in commercial transactions;
- Policies for lenders in a residential mortgage;
- Policies for lenders in a commercial mortgage; and,
- Policies for lenders and purchasers in personal property transactions.
Differences with other forms of property and casualty insurance
Title insurance is not like traditional forms of property and casualty insurance distributed through insurance brokers. For a residential property purchase, the title insurance policy is usually purchased by a lawyer or notary on behalf of the new homeowner in most provinces. The residential owner’s policy protects the ownership interest in the property and is a one-time purchase by an owner usually at the time they acquire title to real property. This policy remains in place for as long as the insured has an interest in the property and it can be transferred without a fee to a spouse in the event of a divorce or to a descendant through a will.
Title insurers provide their clients with a no fault, no deductible claims process. It also includes a duty to defend the insured’s interest in the title in addition to the indemnity coverage. The consumer realizes a protection complementary to that provided by the lawyer or notary and an effective and expeditious process in claims resolution.
Size of Title Insurance Industry
Title insurance is a relatively new product, which appeared in Canada at the beginning of the 90’s. Across Canada, consumers have spurred the development of this marketplace by recognizing the consumer protection benefits derived from the purchase of a title insurance policy.
The use of title insurance varies by province. As an example, according to a recent report by the Law Society of Upper Canada more that 90 percent of all residential real estate transactions in Ontario are title insured. According to the 2006 Annual Statistical Issue of Canadian Insurance magazine, title insurers wrote over $170 million in premiums in 2005. This is a 167% increase in written premiums of $64 million written in 2001. Furthermore, there are now more title insurance premiums written than aircraft, credit or hail insurance premiums written in Canada.
As such in 15 years, title insurance has gone from being an obscure insurance product to a standard product in real estate and mortgage refinancing transactions. Today millions of consumers and a great number of lenders have chosen the protection of a title insurance policy in their real estate conveyance or mortgage refinancing transaction.