If you read nothing else
- Title insurance protects you against problems with a property’s ownership history. It does not cover physical damage to the home.
- There are two types, lender’s and owner’s, and each protects a different party.
- Most Canadian lenders require lender’s title insurance. Owner’s title insurance is usually optional.
- It is a one-time premium paid at closing, not an annual cost like home insurance.
What Is Title Insurance?
Meet Carmen, a 32-year-old accountant in Mississauga, Ontario. She has been looking to buy, and her offer on a nice townhouse was just accepted. Now she is working through her closing costs with her real estate lawyer, Dave. Title insurance keeps coming up, but nobody has really explained what it does.
Carmen knows it isn’t the same as home insurance. What she doesn’t know is what the difference is, whether she has to get it, and whether it’s worth the cost.
“Title” is the legal ownership of a property. Title insurance protects you against issues that could affect that ownership, whether they come from the past or show up later. For Carmen, that means legal and financial protection against problems she might not even know about.
Title insurance protects you against issues that could affect that ownership, whether they come from the past or show up later.
What Does Title Insurance Actually Cover?
So what are these “issues” if they aren’t physical damage? Here are the situations where title insurance could help Carmen:
- Title fraud: Someone forges documents to transfer or mortgage the property without Carmen’s knowledge.
- Undisclosed liens: The previous owner left unpaid debts attached to the townhouse, and Carmen could inherit them.
- Survey errors or encroachments: A fence or structure sits on a neighbour’s land, which could have legal consequences for Carmen.
- Errors in public records: Administrative mistakes in the ownership documents that Carmen or Dave missed.
- Zoning violations: A previous owner built something without the proper permits.
What Doesn’t Title Insurance Cover?
As mentioned, title insurance is not the same as home insurance, and plenty of buyers mix the two up. Here is what Carmen’s policy would not cover:
- Physical damage to the property: Fire, flood and structural damage fall under home insurance.
- Problems Carmen knew about before buying: Title insurance assumes she was unaware of the issue. Anything she knew about before closing is excluded.
- Environmental issues: Soil contamination, or indoor problems like mould growth.
| Situation | Title insurance | Home Insurance |
|---|---|---|
| Forged documents transfer the property | Covered | Not covered |
| Unpaid debts left by a previous owner | Covered | Not covered |
| Fire, flood or structural damage | Not covered | Covered |
| Theft | Not covered | Covered |
Lender’s Title Insurance vs. Owner’s Title Insurance
What is the difference between the two?
Lender’s title insurance protects the lender’s financial interest in the property. Most lenders require it, so Carmen will pay for it as part of her closing costs. The premium depends on factors like the price of the home.
Owner’s title insurance is separate and protects Carmen’s own ownership interest in the townhouse. It’s optional, but often recommended for buyers. It adds to the cost of the lender’s policy, so ask Dave for a quote. The exact premium depends on the purchase price, the location and the provider.
| Lender’s | Owner’s | |
|---|---|---|
| Who it protects | The lender | You |
| Required? | Usually, by the lender | Optional |
| Typical cost | About $400 (BMO estimate) | Ask your lawyer for a quote |
| Paid | Once, at closing | Once, at closing |
How Much Does Title Insurance Cost in Canada?
Title insurance is a one-time premium paid at closing, not an annual fee. The cost varies with property value, location and provider, but it is typically a few hundred dollars. BMO estimates about $400. The townhouse Carmen is looking at is priced at about $875,000, close to the August 2026 average for a freehold townhouse in Mississauga according to TRREB data.
Title insurance is a one-time premium paid at closing, not an annual fee.
That is relatively cheap coverage for protection against non-physical problems. Compare that to a title problem such as a forged transfer or an unpaid lien. Without coverage, the legal fees and the long fight to sort it out land on you.
$400
estimated one-time premium (BMO)
1.5% to 4%
total closing costs as a share of the purchase price (Financial Consumer Agency of Canada)
Does Title Insurance Apply to Second and Private Mortgages?
Often, yes. Lenders on second mortgages and private mortgages frequently ask for title insurance too, for the same reason a bank does: they want their financial interest in the property protected. If Carmen later took out a second mortgage on her townhouse, or borrowed from a private lender, she should expect to be asked for it. Check with your lawyer or broker before you commit, because the cost usually lands in your closing costs.
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