House Insurance vs. Title Insurance

By Margaret E. Hawkins of Merovitz Potechin LLP on Wednesday May 24, 2023.

You’ve just bought a house.  You need insurance – but what kind and why?

In Ontario, house insurance is not mandatory by law, however, most Lenders require that you obtain it, and most people want to have it.  Generally speaking, house insurance covers risks associated with your home and belongings, liability and sometimes even living expenses if you are not able to live in your home for a set duration as a result of an insured loss. 

For example, if you have valid house insurance and experience a loss, it will cover damage to the structure of your home and other detached structures on your property (i.e. a shed) as well as your physical belongings such as your clothing (for example if it is lost in a fire).   Your policy may also pay for your rental car and hotel stays as well as provide financial compensation for accidental bodily harm to yourself or others while at home or on your property.  It is an extremely beneficial type of insurance offered, and highly recommended for all homeowners to have. 

House insurance usually carries a policy that is paid monthly or yearly by the homeowners.  There is also usually a deductible paid by the homeowner on a valid claim.  This policy can lapse and/or change, for various reasons.  Without a valid policy in force, you do not have house insurance and cannot make a claim against any loss incurred.  It’s important to make sure that you read your policy thoroughly and pay your premiums on time.

If you have home insurance, then why do you need title insurance?

Title insurance is a very different type of insurance, but equally beneficial.  It protects your interest as the owner of a property against any losses incurred due to any defects in the title of your property.  It can also protect you from other “off title” issues such as unpaid property taxes by the previous owner.  Even though your lawyer has examined your property thoroughly, certain issues may pre-date the title search period and continue to exist as at the policy date, unbeknownst to everyone involved (including the seller).  In turn, this may cause a problem for you when you sell the property in the future.  Generally speaking, If you are title insured, you won’t have to worry about this.

Some of the risks usually covered by title insurance include (but are not limited to) existing liens against a property, existing work orders, violations of zoning by-laws, and a lack of legal access to the property.  One of the most important risks covered by title insurance is fraud and, for this reason alone, a title insurance policy is highly recommended.  Title insurance does not protect you against any home warranty or structural issues, and it will not cover you for any issues related to the house foundation, fence location, leaks, compliance with building codes, or functionality of home appliances (e.g. HVAC equipment, fridge, etc.). 

Unlike house insurance, a title insurance policy is paid one time, and lasts for the duration of your ownership of the property. When a property is conveyed to you, title insurance is obtained by a lawyer on your behalf and it’s policy remains in force for the entire duration that you own that property.  There is no yearly policy premium to pay, and it will never lapse.  In some circumstances, it can protect a person who inherits your property (for example, your child inherits it from you).  Typically, there is a compensation “floor” (i.e. the amount you paid for your property) and a compensation “ceiling” (up to a maximum percentage of the amount that you paid for your property) for the amount of the policy coverage.

Like any insurance policy, title insurance does have some exceptions as to what is not covered on a standard policy, such as the items noted above and environmental matters.  It is recommended that you review your house and title insurances policies thoroughly, so that you are aware of exactly what is and what is not covered.

The takeaway: at Merovitz Potechin LLP, we strongly recommend that home buyers purchase a property insurance and title insurance policy effective as of the closing date.  Our staff and lawyers will help to ensure that both of these items are in place at the appropriate time.