The quick answer
Title insurance protects a property owner and their lender against losses related to the property's title or ownership. According to FSRA, a policy may respond to unknown title defects, existing liens, encroachments, errors in surveys and public records or title fraud. It does not cover defects you knew about before you bought, environmental hazards or problems only a new survey would find.
The short answer
Title insurance Ontario buyers are asked about near the end of a purchase is a policy that protects a property owner and their lender against losses related to the property’s title or ownership. Title simply means the legal right to own the property. If a problem with that right turns up after you close, a policy may help pay for the loss or the cost of fixing it, depending on what the policy says.
FSRA, the Financial Services Regulatory Authority of Ontario, publishes consumer information on title insurance. This post draws on that guidance and on the Financial Consumer Agency of Canada to explain what a policy may cover, what it leaves out and what to ask your lawyer. It is general information, not legal or insurance advice. Your real estate lawyer is the right person to confirm what applies to your purchase.
What is title insurance?
When you buy a home, your lawyer searches the public records to confirm the seller can transfer ownership and that nothing stands in the way. That search is valuable but it can only find what the records show. Some problems are hidden, recorded incorrectly or not recorded at all.
Title insurance exists for that gap. It is a one-time purchase made as part of closing rather than an ongoing monthly cost like home insurance. The Financial Consumer Agency of Canada includes title insurance in its list of upfront closing costs for buyers, next to home inspection fees, legal fees and property tax adjustments.
It is different from the home insurance you must have in place on closing day. Home insurance protects the building and your belongings from events such as fire. Title insurance is about the ownership of the property itself. Our guide to what happens on closing day in Ontario covers the home insurance requirement.
What does title insurance cover in Ontario?
FSRA says a title insurance policy may provide protection from losses such as the following.
- Unknown title defects that affect your ownership of the property
- Existing liens against the property’s title, including utility bills, mortgages, property taxes and condominium charges
- Encroachment issues
- Errors in surveys and public records
- Other title related issues that may affect your ability to sell, mortgage or lease the property in the future
- Title fraud
A lien is a legal claim against a property for money owed. An encroachment is when a structure, such as a fence or a part of a neighbour’s building, crosses a property line.
The word “may” matters here. Every policy has its own wording, limits and conditions. The list above describes the kinds of losses FSRA says a policy can address, not a promise that every such loss is paid in every case.
What does title insurance not cover?
FSRA is equally clear about the limits. It tells buyers to read the policy and to be aware of possible exclusions, which may include:
- Known title defects, meaning problems you knew about before you purchased the property
- Environmental hazards, such as soil contamination
- Native land claims
- Problems that are only discovered by a new survey or inspection of the property
- Issues that were not listed in public records, such as unrecorded liens and encroachments
The last two items surprise many buyers. A problem that is missing from the public record or that only a fresh survey would reveal may not be covered. Read the exclusions section of the policy as well as the coverage section.
Title insurance also does not replace a home inspection. An inspection looks at the physical condition of the house. Our overview of closing costs when buying a home in Markham shows where inspection and legal fees fit alongside title insurance.
Comprehensive coverage and gap coverage
FSRA describes two coverage ideas worth knowing by name.
| Coverage type | What FSRA says it does |
|---|---|
| Comprehensive coverage | Protects you from losses related to the property’s title and may also cover risks to your title due to a lawyer’s negligence or error |
| Gap coverage | Insures you for the gap between the time your purchase finalizes and the time registration is complete in Ontario’s land registration system |
Not every policy includes both. The names and details can differ between insurers. When your lawyer presents a policy, ask which of these protections it contains and what the limits are.
Lender policies and owner policies
A title insurance policy can protect the lender or the owner. FSRA explains that a lender’s policy protects the lender from losses if the mortgage is invalid or unenforceable. It usually provides coverage for the amount of the mortgage.
That distinction is important because protection for your lender is not automatically protection for you. If your lender requires a policy, ask whether it covers only the lender or also names you as the owner.
How do you get title insurance in Ontario?
In a typical purchase, your real estate lawyer is the person who raises title insurance with you and arranges it, because the lawyer is already working on the title search and the closing. A step by step view looks like this.
- Your lawyer reviews the agreement of purchase and sale and searches title.
- Your lawyer or your lender explains whether a title insurance policy is required or available for your purchase.
- You review the policy terms, including coverage, limits and exclusions.
- The one-time premium is paid as part of your closing costs.
- The policy is issued as your purchase closes and registers.
Ask your lawyer to put the cost in your reckoning of closing costs early. We have not confirmed a current price range from an official source, so we are not quoting one here. Your lawyer can give you the actual figure for your property.
Questions to ask your lawyer before closing
Use this checklist when the policy is explained to you.
- Does this policy protect me as the owner or only my lender?
- Does it include comprehensive coverage and gap coverage?
- What are the exclusions, including known defects and anything not in the public record?
- What is the one-time premium and is it already in my closing cost estimate?
- Does the policy cover title fraud and how is that described in the wording?
- Do I need a survey for this property and how would that change what the policy covers?
- If my situation includes a condominium, how do unpaid condominium charges affect coverage?
If you are buying a condominium, the status certificate is a separate document that your lawyer reviews and it answers different questions from a title insurance policy.
Where title insurance fits in your budget
The Financial Consumer Agency of Canada suggests buyers be prepared to spend between 1.5% and 4% of the purchase price on closing costs. Title insurance is one line inside that range, with legal fees and property tax adjustments. Ontario land transfer tax is another large item for many buyers, which we explain in land transfer tax in Markham.
Because the range is wide, the best habit is to ask for a written estimate from your lawyer before you waive conditions or sign. It is easier to plan for a number than to be surprised by it on closing day.
What to do next
Before you make an offer, think through the following steps.
- Choose a real estate lawyer early so you can ask about title insurance before closing week.
- Ask for a closing cost estimate that includes the title insurance premium.
- Read the coverage and exclusions on any policy offered to you.
- Confirm what protects you as the owner and what protects only the lender.
- Keep a copy of the policy with your other closing documents.
If you are planning a purchase in Markham and want to understand the full path from offer to keys, our buyers page outlines how we work with buyers. When you are ready to talk through your plans, you can contact us.
Common questions
What is title insurance in Ontario?
Title insurance is a policy that protects residential or commercial property owners and their lenders against losses related to the property's title or ownership. FSRA, the regulator that publishes consumer information on it, describes it as protection against problems that affect your ownership or your ability to sell, mortgage or lease the property.
Is title insurance a closing cost in Ontario?
Yes. The Financial Consumer Agency of Canada lists title insurance among the one-time closing costs, alongside home inspection fees, legal fees and property tax adjustments. It suggests buyers be prepared to spend between 1.5% and 4% of the home's purchase price on closing costs overall.
What does title insurance not cover?
FSRA says title insurance does not cover known title defects that you knew about before you purchased. It also does not cover environmental hazards such as soil contamination, native land claims or problems only discovered by a new survey or inspection. Unrecorded liens and encroachments are excluded too.
What is gap coverage in title insurance?
Gap coverage insures you for the gap between the time your property purchase finalizes and the time registration is complete in Ontario's land registration system. FSRA describes it as one of the coverage types available.
Does title insurance cover title fraud?
FSRA lists title fraud among the losses a title insurance policy may provide protection from. The exact wording, limits and exclusions are set by the policy, so ask your lawyer to explain the policy you are offered.
How much does title insurance cost?
The cost depends on the insurer and the policy. We have not confirmed a current price range from an official source. Ask your real estate lawyer for the exact premium and for what the policy includes before closing day.
Keep exploring
- First-Time Buyers A real budget, a realistic neighbourhood list and no surprises at closing.
- Land transfer tax calculator Ontario tax on any price, with the first-time buyer refund.
- Mortgage calculator Monthly payment, minimum down payment and the stress test.
Sources
Figures and rules were checked against these sources on the date this post was published or last updated.
Not advice. This post is general information only. It is not legal, tax, mortgage or investment advice. Rules and figures change, so confirm the details for your own situation with a qualified professional before acting.
Market data. Any prices quoted are general information for the period stated. They are not an appraisal or an opinion of value for any specific property.