Title Insurance When Buying a Home in BC: Do You Need It?

When you buy a home, you may be offered title insurance as part of the closing paperwork. It is usually presented as a one-time cost, and it is natural to wonder whether it is a sensible protection or an extra you can skip.

This article explains in plain terms what title insurance is, the questions to ask about any policy, and how it relates to the work your lawyer or notary does. Policies differ between insurers, so the wording of your actual policy is what counts.

This article covers the law of British Columbia.

What title insurance is

Title insurance is a policy that is meant to protect an owner, and sometimes a lender, against certain problems with ownership of a property. Those problems may include things like errors in records or defects that were not found before you bought. It is different from home insurance, which deals with damage to the building and contents.

A policy is a contract. What it covers, what it excludes, how long it lasts and how a claim is made are all set out in its wording. Two policies with the same name can protect you quite differently.

How it relates to your lawyer's or notary's work

Your legal professional normally prepares the transfer and the tax return and files them at the Land Title Office. A notary in good standing may draw instruments relating to property that are meant to be registered, and the practice of law includes drawing such instruments. Title insurance does not replace that work, and it does not change who must pay tax. The transferee must pay property transfer tax and file a return when applying to register, and the registrar may refuse an application if there are reasonable grounds to believe the tax is unpaid or the return is incomplete or unfiled.

Ask your lawyer or notary how a policy would fit with the searches and checks they already do, and whether it adds protection in your particular purchase.

Property transfer tax is charged on fair market value at 1% on the portion up to $200,000, 2% on the portion above $200,000 up to $2,000,000, and 3% on the portion above $2,000,000. A further 2% applies to the residential value above $3,000,000. Because the tax is a closing cost, it is normally paid through the conveyancer on completion.

There are exceptions. For properties registered on or after April 1, 2024, the first-time home buyers' program gives a full exemption if fair market value is $835,000 or less, and a partial exemption if it is above $835,000 and below $860,000, as long as the lot is 0.5 hectares or smaller. To qualify, you must be a Canadian citizen or permanent resident, must have lived in BC for at least a year immediately before registration or filed at least 2 income tax returns as a BC resident in the last 6 taxation years, must never have owned a principal residence anywhere in the world or received a first-time buyers' exemption or refund, and must use the home as your principal residence. If only some co-buyers qualify as first-time buyers, only their ownership share is exempt. Whether you qualify depends on your situation, so confirm it with your legal professional.

Questions to ask before you say yes

• Who is insured: you, your lender, or both?
• What is covered, and what is specifically excluded?
• Does the coverage last as long as you own the home?
• What is the cost, and is it paid once or on a continuing basis?
• How do you make a claim, and who handles it?
• Does the policy cover matters your lawyer or notary has already checked, or only things that could not be found?
• Is there anything about this property, such as a strata lot, new build or older home, that makes the answers different?

If you are buying a strata lot, remember that other documents also matter. The strata corporation must give an Information Certificate within one week of a request by an owner, a purchaser or a person they authorize, and buyers use it to review the strata's finances and rules. Title insurance is not a substitute for reading it.

Weighing whether it is worth it

There is no single answer. Some buyers value an added layer of protection and the simplicity of a one-time cost. Others decide that the checks done by their legal professional are enough for their situation. Your decision may depend on the age and history of the property, whether you have a mortgage, how long you plan to stay and how comfortable you are with risk.

If a lender requires a policy as a condition of the mortgage, that is a separate point to confirm with your lender and your legal professional.

Keep the bigger picture of your closing costs in view as well. A buyer usually makes a deposit with the offer or after the offer is accepted, and it is usually held in the licensee's brokerage trust account, with the brokerage holding it as stakeholder. For new developments (presales), developers must hold buyers' deposits in trust under the Real Estate Development Marketing Act. A title insurance premium is a separate cost on top of these.

What to do next

• Ask for the policy wording, not just a summary, before completion day.
• Compare what it says with the questions above.
• Talk through the choice with your lawyer or notary.
• Keep a copy of any policy with your closing documents.
• Ask whether your lender requires any particular coverage.

Frequently asked questions