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What is Title Insurance, and what does it cover?

Like all other insurance policies, a title insurance policy is there to protect the policyholder in the event of certain events taking place.  One of the most common forms of coverage is called “gap coverage” or “gap insurance”.  This coverage protects the buyer between the time the buyer pays the seller for the home and takes possession of it, to the time it takes for the Alberta Land Titles Office to register the buyer’s name as the new owner on the Certificate of Title.

  • Example: Jane buys a home from John.  The possession date is January 1.  Jane pays John on January 1 and sends the transfer of land to the Alberta Land Title’s Office on the same day.  The Land titles office cannot process that transaction until February 15 due to internal government delays.   However, 1 day after Jane pays John for the home, John is sued by a 3rd party and that 3rd party registers a charge against the land and property that Jane just bought.  Jane could not have known about this at the time she purchased the home, but will learn of it (the hard way) when she receives her new Certificate of Title back from the Alberta Land Titles Office.If Jane has gap insurance then her insurer will assist her in dealing with that issue.  If she does not, Jane may have to look directly to John for compensation, who may have already moved away to Hawaii.

Another purpose for title insurance is to cover the insured from title fraud.  For instance, imagine you purchased a property for someone who was pretending to be someone else?  Or imagine that you are buying a property from someone who provided you with fraudulent paperwork.

Title Insurance policies can also protect the insured against unknown deficiencies such as deficient septic tanks or a deck that does not have the appropriate permits in place.  Like all insurance policies, it depends on the type of policy being purchased.

Obtaining a policy of title insurance will also allow the buyer and seller to close the deal before the Certificate of Title returns from the Alberta Land Titles Office.  This is often permitted by the buyer’s lender as well, so long as the form of coverage is permitted by the buyer’s lender.

Who is protected with a Title Insurance Policy and how much does it cost?

Like all other insurance policies, this policy protects the owner of the policy and any other named parties.  This means that you can obtain a policy to protect the buyer only, or you can purchase a policy to protect the buyer’s lender only, or you can purchase a policy to protect both the buyer and the lender.

Title Insurance companies charge different rates.  It also depends on who you are buying the policy for? (depending on your lender’s requirements, it may be necessary that an insurance policy is purchased on their behalf and not just yours).

The cost of a title insurance policy is directly correlated with the value of the home you are buying or selling.

We have seen title insurance policies fluctuate in cost from as little as $150 to $2500.

How long am I covered for?  Do I have to pay an annual fee?

You are not required to obtain a new title insurance policy each year.  The title insurance policy you purchase has a one-time fee and will protect the buyer or lender for as long as the new buyer owns the property.

Learn more about real estate law in Alberta, including how to buy or sell a home, by arranging a free introductory consultation with an Edmonton Law Office real estate lawyer.

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