Do You Need Title Insurance When Buying a Home in Ontario?

Buying a home usually means signing a long list of documents and paying a number of costs you may not have thought about. Title insurance is one of them, and many buyers hear about it for the first time in the weeks before closing.

The practical question is whether you need it, what it actually protects, and what it leaves out. This article explains how an owner's policy generally works in Ontario so you can ask better questions before you close.

Is title insurance mandatory in Ontario?

No. Title insurance is not required by law in Ontario. Buying it is a choice, although some buyers decide it is worth having for the protection it gives.

Whether a particular lender or your own situation makes it sensible is a separate question. Your lawyer can explain the options for your purchase, and your mortgage documents will show what your lender asks of you.

Because the choice is yours, it helps to weigh two things side by side: what a standard policy generally covers and what it generally leaves out. The sections below walk through both.

What a standard owner's policy usually covers

A standard owner's policy generally covers the following kinds of problems:

• Hidden defects in ownership.
• Existing liens, such as unpaid utilities, mortgages or property taxes.
• Encroachments.
• Survey and public-record errors.
• Title fraud.

The point of the policy is that these are problems you may not be able to discover before closing, even with careful searching. Exact wording differs between policies, so read the one you are offered.

An encroachment, for example, is when part of a building, fence or other structure crosses a property line. It is the kind of issue that can be hard to spot by looking at a home during a viewing, which is one reason people ask about coverage for it.

Owner's policy versus lender's policy

A lender's policy is a separate product that protects the mortgage lender, not you. If your lender requires title insurance, the policy it asks for protects the lender's interest in the property.

That means having a lender's policy does not automatically give you the protection of an owner's policy. If you want your own ownership covered, ask specifically about an owner's policy.

When you review your closing paperwork, check which of the two policies is actually being described. The names can look similar, but the person protected is different.

What a policy usually does not cover

A standard policy generally excludes several things:

• Defects you knew about before buying.
• Environmental hazards.
• Native land claims.
• Zoning violations from later renovations.
• Problems unrelated to title.

If you spot an issue before closing, such as a concern with the property's ownership or boundaries, raise it with your lawyer rather than assuming the policy will respond to it later.

Title insurance is also not the only remedy for fraud. A victim of title fraud may also claim compensation from the government's Land Titles Assurance Fund. Whether that route suits a given situation depends on the facts, so a lawyer can help you assess it.

Where title insurance fits in your closing costs

Closing costs are one-time fees paid when you buy a home, such as inspection fees, legal fees, property tax adjustments and title insurance. The Financial Consumer Agency of Canada suggests buyers budget 1.5% to 4% of the purchase price for them.

Because that range is a budgeting guide rather than an exact total for your purchase, it helps to ask for each cost in writing and add them up well before closing day. Title insurance is one line on that list, not the whole picture.

Seeing the policy as one item among several also makes the decision calmer. You can compare its cost with the protection described above, and with the exclusions, instead of treating it as a last-minute add-on.

What to do next

• Ask your lawyer whether an owner's policy is available for your purchase and what it would cover.
• Check your mortgage commitment to see whether your lender asks for its own policy.
• Read the exclusions in any policy before you decide.
• Tell your lawyer about anything you already know about the property's title, survey or past work.
• Add title insurance to your closing cost budget alongside legal fees, inspection and adjustments.

A short conversation with your real estate lawyer before closing is usually the easiest way to get clear answers about your specific property.

Keep your questions practical. Ask what is covered, what is excluded, who is protected, and what the policy would mean for your own plans for the home. How this applies depends on your situation, so it is worth confirming with a lawyer.

Frequently asked questions