There are two types of title insurance policies: the owner’s policy (protecting owners of immovables) and the hypothecary creditor’s policy (protecting creditors with a hypothec on an immovable).*

Essentially, the purpose of title insurance is to cover a risk that could interfere with the owner of the insured immovable’s right of ownership or a risk with respect to the hypothecary creditor’s hypothec, up to the amount of the policy, which general corresponds to the property’s purchase price (for an owner’s policy) or the value of the loan (for a hypothecary creditor’s policy).

However, title insurance is not insurance against latent defects, nor insurance guaranteeing the hypothecary debtor’s payment. It also does not protect against the risks that the insured has permitted, created, or accepted, nor does it cover environmental problems or construction defects.

In residential matters, title insurance will indemnify the insured for the loss caused, in particular, by:

• Publication of a notice of a construction hypothec against the insured immovable after the transaction (sale or hypothec);
• Real estate fraud caused by identity theft (the protection offered against real estate fraud by identity theft in some standard home insurance policies is often more limited than that offered by a title insurance policy);
• The non-compliance of a building and its annexes with a municipal zoning by-law that will lead to the obligation to carry out work to demolish or modify the existing structures, including the removal of structures erected without a building permit;
• All arrears of municipal and school taxes, as well as the transfer taxes and/or arrears of condo fees due and unpaid by the seller.

Coverages offered by title insurance provide protection against risks that a jurist (lawyer or notary) may not be able to detect in their searches and verifications of prior titles, not to mention an error or omission in the context of said verifications.

Ultimately, it is important to specify that the insurance coverage may vary from one title insurer to another and may differ in the case of commercial title insurance.

*See your dictionary for meanings of terms used in Roman or Civil law, which is the code of law in the province of Québec.

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