Title insurance vs home insurance–what’s the difference?
While title insurance and home insurance are two distinct and varied types of insurance, many Canadian homeowners think they are one and the same.
Unfortunately, if you don’t understand the difference between title insurance and home insurance, you can be vulnerable to unpleasant surprises down the road.
Here’s everything you need to know about title insurance and home insurance, and the differences between both.
You’ve probably wondered what the word “title” in title insurance means. Title is a term that means you have legal ownership of a property. You get the title to a home when the previous owner signs the deed and transfers the property to you.
Each title in Canada is registered in the government’s land registration system.
Title insurance, then, is an insurance policy that protects property owners through an owner’s policy and lenders through a loan policy. We will discuss the owner’s policy in this article.
Purchasing title insurance involves a one-time fee, typically purchased at the same time as you buy your home. But it is possible to buy title insurance any time after you buy a property.
In Canada, the average fee for title insurance is between $125 and $325 according to CBC.
What does title insurance cover?
A title insurance policy protects you from various losses such as title defects that you didn’t know about. It also protects you from liens on the property due to the previous owner’s unpaid debts.
Title insurance covers encroachment issues such as if your backyard shed is actually on your neighbor’s property and must be removed. It also covers errors in surveys, as well as title fraud which is when a person uses false identification to get the title of your property and then get a mortgage or sells the home without you knowing.
It also protects you from any other title issues that could impact your ability to sell, lease or mortgage your property in the future. Title insurance also includes the “duty to defend” which covers the legal expenses you incur while you deal with title issues.
As long as you own your property, the title insurance policy is valid. And your policy likely extends to your heirs in a will or to a spouse after a divorce.
At FCT, our teams of dedicated experts work across Canada and bring unparalleled underwriting knowledge and experience to the table. We offer you so much more than a policy. And we’ve been doing that for close to 30 years.
What isn’t covered by title insurance?
Always carefully read your policy to know what your title insurance covers. There could be exclusions such as environmental hazards (like contaminated soil), zoning bylaw violations (like if you finish your own basement without a permit, etc.)
Two types of title insurance
The two main types of title insurance policies are an owner’s policy and a lender’s policy. Homeowners need an owner’s policy, while the lender’s policy protects your lender from any losses that could come up if the property’s mortgage is invalid. While the owner’s policy coverage is for the total purchase price, the lender’s policy coverage is often for the mortgage amount.
You can buy title insurance for both residential and commercial properties, but make sure you read the policies carefully because the coverage varies between the two.
What is home insurance?
A home insurance policy, unlike title insurance, requires a monthly premium payment.
Home insurance covers loss and damage to your residence as well as other structures on your property in certain instances. There are a wide variety of policies on the market, yet generally speaking, there are six types of protections in most standard policies.
- Dwelling coverage: protects you from natural disasters such as fire, wind, and lightning. Often, flood and earthquake coverage must be purchased separately.
- Other structures coverage: protects your sheds, fences, and detached garages from natural disasters.
- Personal property coverage: covers the items inside your home. This includes furniture, clothing, electronics, jewelry and so on. Each policy will outline the maximum amount of personal property coverage that you are entitled to.
- Personal liability protection: will pay for your legal defense if someone gets hurt on your property. It’s important to note that your policy will only pay up to your coverage limit. If your legal costs or a settlement exceeds your coverage, you will have to pay the rest out of pocket.
- Medical payments coverage: if someone gets injured on our property and they don’t want to sue. This coverage will pay for their medical expenses such as crutches, prescription medicines and so on.
- Loss of use coverage: If your home becomes uninhabitable due to an event that is covered by your policy, you’ll get coverage for expenses such as a hotel stay and meals at restaurants while your property is being repaired. Again, there is a limit to how much coverage you get for loss of use. Always check with your insurance provider.
Be prepared—purchase title and home insurance for your property
The best way to protect yourself from expensive and unexpected costs related to your property is to invest in title insurance, in addition to home insurance.
Do you have additional questions about title insurance? Our team at FCT is happy to answer your questions and give you the advice you need to make an educated decision. Fill out this form and one of our agents will get back to you promptly.