Why do I need title insurance if I have home insurance?

I’m buying a new home and my real estate lawyer is recommending that I get title insurance. I’ll have home insurance, so is it really necessary?

RECO doesn’t regulate real estate insurance, but we occasionally receive questions about it. Some general information to help you understand what title insurance is: “Title” refers to the ownership of a property as reflected in the government’s land registration system. Title insurance provides coverage against risks and losses that relate to your home’s legal title or, more specifically, your ownership. This doesn’t include issues like fire damage, theft or general wear and tear, which would typically be covered by standard home insurance contracts.

Title insurance, which isn’t required in Ontario, offers coverage for a range of different risks, such as:

Title fraud, which occurs when someone uses stolen or forged documents to steal your identity, then transfers your home’s title into their name, without you knowing about it.

Existing liens against title, such as property taxes left unpaid.

Encroachment issues, where a structure has been erroneously built too close to or on a neighbouring property.

For a one-time fee, or premium, title insurance provides coverage for as long as you own a property. Go over the details with your real estate lawyer, title insurance company or insurance broker.

As I mentioned, title insurance is not the same as home insurance or a home warranty and typically does not cover:

Title defects you were aware of before you purchased your property.

Environmental hazards, such as soil contamination. Indigenous land claims. Issues that would only be found by an inspection or new survey.

Issues not listed in public records, such as unrecorded liens or encroachments against the property.

Zoning bylaw violations from changes, renovations or additions that you undertook following your purchase of the property.

Your policy should include a comprehensive list of terms and conditions, exclusions and restrictions.

More information can be found in this helpful guide from the Financial Services Commission of Ontario, the regulatory body that oversees the insurance sector. Joe Richer is registrar of the Real Estate Council of Ontario (RECO). He oversees and enforces all rules governing real estate professionals in Ontario. Email questions to askjoe@reco.on.ca. Find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at youtube.com/RECOhelps.