In the last few years, title insurance has gone from a little-known product to being acknowledged as an essential part of any property purchase. Today, nearly all Ontario residential and commercial real estate transactions are title-insured. Yet title insurance appears to be somewhat misunderstood by many, and worse yet, some lawyers only obtain title insurance simply because a lender requires it as a condition of financing.

While it is a known fact that title insurance protects property owners against matters related to their ownership or title, there are many misconceptions about title insurance coverage and the finer details of individual policies. That is why it is important to understand how title insurance works and dispel some of the myths surrounding it.

Is title insurance a one-size-fits-all policy?

It is not a one-size-fits-all agreement, and the wrong policy can actually end up doing more harm than good to the insured.

One of the most common errors lawyers make is that they end up purchasing the wrong title insurance policy for the property. For example, a lawyer purchases a single-family dwelling policy when it is a multi-unit property. In this type of case, the multi-unit property would require more searches than a single unit, and after closing, it is discovered that there were no searches done for outstanding work orders that were later identified. Given these details, the homeowner or lender could be denied coverage because the lawyer did not do an adequate search and ended up purchasing the wrong policy.

Can title insurance cover anything that comes up before closing?

Title insurance will cover many issues that have been made apparent before closing, after a thorough search or survey of the property.

It’s important that lawyers invest time in asking their clients about the type of property they are buying and how they plan to use it so they can perform the searches required for the specific property type.  This will ensure that the client gets the correct title insurance policy and peace of mind for lawyers and their clients.

With title insurance, is there coverage for future renovations?

Title insurance policies will only cover defects that were identified prior to closing. As a rule, title insurance policies will not cover compliance defects that may have been identified in a traditional search through governmental building department records.

This includes conducting renovations on the property without obtaining a permit and if it is not up to code. For instance, if you notice illegal wiring behind the drywall, the defect would never be discovered in a traditional property search. In such a scenario, your title insurance will not cover the cost of bringing the wiring up to code.

This is why it is recommended to read the policy and understand precisely what is covered and what is not.

Title insurance from Chicago Title can provide peace of mind with the knowledge that your client’s interests are fully protected. To learn more, get in touch with us at Chicago Title Today.