For most people, buying a home is the largest investment they will make during their lifetime. For this reason, it is so important to properly protect your investment from a wide range of risks. From structural damage to unscrupulous attempts by fraudsters to mortgage, transfer, or misuse the property – obtaining adequate insurance coverage should be a priority for all homebuyers.
If you are in the process of purchasing a home or if you already own one, you may already be familiar with the various insurance options. Below we discuss the main differences between home insurance and title insurance and how these two types of insurance policies complement each other to protect the homebuyer and their significant assets.
HOME INSURANCE
A home insurance policy (also known as house insurance) can offer protection for your home, as well as its contents, in the case of theft, loss, or damage. This protection can apply to the interior of the home, the exterior of the home, accessory structures, and the remaining land. It may also provide compensation for certain living expenses if you are temporarily unable to live in your home.
There are many forms of insurance on the market, but here are the standard types of coverage offered under most home insurance policies:
- Personal Liability Coverage: as a baseline, insurance coverage provides protection against claims of bodily harm where the injury occurred on your property or where you have caused damage to another person’s property, whether at home or away. For example, coverage in the unfortunate circumstance of someone slipping and falling in your driveway and injuring themselves.
- Building Coverage: This is your standard coverage against loss and/or damage to your home. For example, if your house catches fire and sustains damage, this coverage would apply and offer you financial compensation. Note, it is standard for mortgage lenders to require insurance coverage in the case of fire, in order to protect their interest in your house.
- Other Structures Coverage: This type of coverage can protect structures other than your main residence in case of loss and/or damage, including your shed, detached garage, or pool.
- Personal Property Coverage: This coverage can protect your personal belongings inside your home such as clothing, furniture, electronics, jewelry, etc.
- Medical Payments Coverage: This coverage can protect homebuyers from incurring out-of-pocket medical expenses.
- Loss of Use Coverage: In the event of a fire, it can cover expenses such as a hotel or restaurants during the time the home is considered uninhabitable.
Keep in mind that all the different types of coverage discussed above will have limits on what and how much is covered. In reviewing the policies, you may find that the “standard” policy terms do not offer enough coverage or exclude certain natural disasters (such as flood coverage, damage to vehicles from hailstorms, etc.), which may need to be purchased separately. This is why it is important to review your home insurance policy with your insurance provider and discuss all the deductibles, exclusions, and limitations, as well as whether the value limit is sufficient for the value of your property.
In preparation for closing on the purchase of your home, you should contact 2 to 3 insurance companies and request detailed quotes to compare the various offerings. Not all insurance policies are created equal! Take the time to… read the fine print.
TITLE INSURANCE
As the name suggests, title insurance protects homebuyers and their lender(s) (if applicable) against losses related to the property’s title or ownership. Unlike home insurance, title insurance is sold as a one-time premium with no recurring yearly/monthly fee, but remains active for as long as you are the owner of the property.
Below is a list of some of the key risks addressed by title insurance:
- Someone else owning an interest in the insured title (and therefore your property) without you being aware;
- Existing liens against the property due to the previous owner’s unpaid debt;
- Some limited encroachment issues (i.e., a neighbour’s shed having been built over the property line and which now needs to be moved);
- Outstanding municipal utility charges by previous owner(s) which form a lien against your property;
- Issues revealed in an up-to-date survey which you were not made aware of but now make it difficult to resell the property;
- Forgery or impersonation to the extent that it affects the validity of your interest in title;
- Other title-related issues that could affect your ability to sell, mortgage, or lease your property.
Keep in mind that title insurance is not a warranty on your home. It does not provide any assurance that the house itself is built adequately or that there are no hidden defects that may need repair.
However, title insurance will cover the remedial cost (including legal fees) should a title issue that falls under the scope of the policy arise after closing. In general, title insurance is arranged for you by your real estate lawyer as part of the purchase transaction but be sure to discuss all available options with your lawyer beforehand to ensure coverage.
For more information, please visit one of the title insurance providers available in Ontario:
- Stewart Title : https://www.stewart.ca
- First Canadian Title : https://fct.ca
- Chicago Title : https://chicagotitle.ca
- Title PLUS : https://titleplus.ca
SUMMARY
Home ownership does not come without risk and the best way to protect yourself from unexpected, and possibly very expensive, costs is to invest in adequate insurance coverage. All homebuyers should take the time to educate themselves on various policy options and strongly consider obtaining both home insurance and title insurance when purchasing a home. With home prices at a record high, home and title insurance remain an affordable way to protect what is likely your largest single asset.
If you are a homeowner or are planning to purchase a home, contact a real estate lawyer at Soloway Wright LLP today and we will assist you with ensuring that you have the right type of insurance for you and your family.
Soloway Wright LLP is a community-based law firm with offices in Ottawa and Kingston. With over 75 years of experience, our team of over 35 specialty lawyers in Ottawa and Kingston offer a dynamic blend of knowledge and experience to clients requiring assistance with Business Law, Commercial Leasing, Commercial Litigation, Condominium Law, Construction Law, Corporate Finance & Securities, Employment, Labour & Public Law, Workplace Investigations, Environmental Law, Estate Planning & Administration, Insurance Law, Medical Malpractice, Personal Injury, Municipal, Land Development & Expropriation, Real Estate & Development, and Tax Law matters. Our goal is to bring your legal issue to an effective, affordable, and successful conclusion.
DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. The information contained herein summarizes only certain aspects of the subject matter and is not a comprehensive review of applicable law. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.
