Title Insurance: What Are You Actually Paying For?

When you’re buying a home, title insurance is one of those line items that shows up in your closing costs without much explanation. Your lawyer mentions it, you nod, you pay it. But what does it actually do, and do you really need it?

The short answer is yes. Here’s why.

It’s Not Just for the Bank

Most lenders require title insurance as a condition of your mortgage, which leads many buyers to assume it exists purely to protect the bank’s investment. That’s partly true, but you can also purchase your own owner’s title insurance policy, and the two cover very different things.

The lender’s policy protects the bank’s interest in the property. Your policy protects yours. Given that your home is likely the largest purchase you’ll ever make, understanding what owner’s title insurance actually covers is worth your time.

What Title Insurance Protects Against

Title insurance covers a range of issues that can surface after closing, such as problems that existed before you owned the property but only come to light later.

Survey errors and encroachments are a common example. Imagine settling into your new home and discovering that your neighbour’s fence has been sitting six inches onto your property for the past decade. Or that a shed was built partially over your boundary line. Without a new survey — which many buyers skip due to cost — these issues may not be caught during a standard legal review. Title insurance can cover the cost of resolving them.

Title fraud is another risk that’s grown in recent years. This occurs when someone forges documents to transfer ownership of your property or register a mortgage against it without your knowledge. It sounds unlikely, but it happens — and the consequences can be severe. Title insurance provides protection and covers the legal costs of restoring your title.

The policy also covers issues like unpaid property taxes or utility liens from a previous owner that somehow weren’t caught during the transaction, zoning bylaw violations from work done by a previous owner without proper permits, and errors in public records that affect your ownership.

What It Doesn’t Cover

Title insurance is not a home inspection. It won’t cover physical defects in the property, environmental issues, or problems that arise after your purchase date. It’s also not a substitute for a real property report; it’s a complement to it.

A Small Cost for Significant Peace of Mind

Owner’s title insurance is typically a one-time premium paid at closing, and it covers you for as long as you own the property. For most Manitoba homebuyers, that’s a modest cost relative to what it protects.

If you have questions about title insurance or what to expect during a real estate closing, TLR Law is here to walk you through it. Call us at (204) 925-1900 for guidance and support.