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Understanding Title Insurance: An Essential Safety Net in Property Transactions

In the world of real estate transactions, one form of protection that often remains misunderstood or underestimated is title insurance. Despite its substantial role in preserving the financial stability of property owners and lenders, title insurance can sometimes be seen as a cryptic concept to those unfamiliar with the intricate operations of the real estate sector.

Title insurance is a unique type of indemnity insurance. It safeguards the holder from potential financial loss linked to defects or issues concerning the title to a property. Usually, title insurance is procured during the home-buying process.

Types of Title Insurance

There are two primary kinds of title insurance: lender’s policies and owner’s policies.

A lender’s policy, as the name suggests, is designed to protect the lender. This form of coverage is typically a requirement for obtaining a mortgage. Should there be a problem with the title that results in a loss, the lender’s policy would cover the amount of the mortgage loan.

Conversely, an owner’s policy protects the property owner. It’s usually issued for the purchase price of the home and protects the homeowner’s financial investment in the property against claims or legal fees that may arise due to disputes over the title.

Coverage of Title Insurance

Title insurance offers protection against past events associated with the property’s title that may surface after the closing process. Such events can encompass a wide array of issues like undisclosed liens, forgery, undisclosed heirs, and recording errors.

If a claim is made against the title, the title insurance company shoulders the responsibility of providing legal defense against the claim. Furthermore, if the claim proves to be valid, the insurance company would compensate for the financial loss up to the limit of the coverage.

Protection Offered by Title Insurance

Title insurance offers vital protection to both real estate owners and lenders against loss or damage arising from liens, encumbrances, or defects in the title or actual ownership of a property.

In contrast with traditional insurance that offers protection against future events, title insurance primarily safeguards against claims for past occurrences. Such a focus on past issues helps ensure that the title to the property is free and clear, reducing the risk of future ownership disputes and offering peace of mind to both buyers and lenders.

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Melissa has 8+ years of combined Commercial, Business and Contract Law experience as In-House Counsel in manufacturing, health, real estate development, and broadcast communication industries. She is instrumental in developing strategies to minimize legal risk and ensure regulatory compliance.

She has 6+ years of Human Resources Management experience and a Chartered Professional in Human Resources (CPHR) designation. Her practice includes Family Law, Civil Litigation, Wills & Estates and Real Estate & Conveyancing.

For fun, she visits ancient sites and ruins and belts out popular Broadway tunes.

northam law corporation

Northam Law is a boutique law firm offering advisory services in Real Estate Law and Conveyancing, Business Law, and Human Resources. Our practice areas also include Wills & Estates and Family Law. Notarization services are also available.

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