Cancelling Your Insurance When You Sell

If you are selling real estate, keep in mind that you will want insurance coverage on your house or other buildings until the sale proceeds are in your pocket. Think twice before cancelling your insurance early just to save a bit on premiums. While a loss during those days is not that likely, it is a possibility.

Vacating for Even a Short Period of Time may Void Coverage

Most insurance policies say that your policy will be void if your property is vacant for more than a few days. Some might do so in 48 hours. Some might give you 5 days. Your insurance company will consider your property at greater risk because no one is there to monitor what is happening to it. The fact that they continue to collect premiums won't help you. Therefore, if you move out of your existing home into a new one that you have purchased, there may be a period of time that your policy is void simply because you have vacated it more than the permitted number of days. You may need to have your policy amended to cover the gap and pay a higher premium for that. The only way to find out if this will apply to you is to read your policy booklet or ask your insurance agent.

Keep your Coverage in Place until the Money is in your Pocket

Some people cancel their insurance effective the day the buyer moves in. The problem is that in the vast majority of Saskatchewan real estate sales, the land titles office will be processing documents for a few days and then the buyer's mortgage company will need to advance their funds after that. If your former home burns down or is damaged during that time, the buyers' mortgage company will probably refuse to advance. The buyers' insurance company may or may not cover the loss, and regardless, they are not your insurer so they will not be looking after your loss. The solution is to keep your own policy in force until you are paid out. Some insurance agents tell people that once the buyer takes possession, you no longer have an insurable interest in the property. I doubt this is correct. Your are an "unpaid vendor" and that is considered a legal interest in the land. Therefore my view is that you still do have an insurable interest. Regardless, if a loss occurred during that time, you surely would be in a better position with a policy that had not yet been cancelled. That's better than no policy at all.

If Your Convert Your Home to a Rental Property

If you decide to keep your home when you move and make it a rental property, discuss this with your insurance agent. A change in use may void your policy unless you notify your insurer and have the policy amended. Talk to your insurance agent if you are doing that.

Title Insurance - Do You Need It?

Title insurance is a product sold in Canada by a number of specialized insurance companies. The most well known reasons for someone to obtain title insurance are:

  • You are buying property or getting a mortgage loan. Your bank requires either a current survey certificate/real property report or alternatively, title insurance. If there is no current survey certificate, then most clients opt for title insurance instead as it costs significantly less.

  • You are buying a real estate property and would like to protect yourself, even if there is no bank/lender requiring you to buy it.

  • If mortgage money or property sale proceeds are being released before the transfer or mortgage have completed registration at land titles, title insurance will cover the risk of a surprise registration appearing on title that you couldn't see when documents were submitted to land titles.

It is only normal to not want to purchase insurance coverage when no one requires you to do it. However, before deciding to save the money when you are not being forced to buy title insurance, consider that there are some other benefits that may make it worth your while. Then make the decision that feels right for you.

What Risks are Covered by Title Insurance

Some good reasons to consider buying insurance are below. Keep in mind that these are general statements only to keep my article somewhat easier to read. You would need to read the policy wording to be sure the coverage applies.

  • There is no survey certificate (real property report) for your property. Your bank won't advance your mortgage without either a survey or title insurance. Title insurance is roughly 1/3 or 1/4 the cost of a new survey.

  • Title insurance can normally let the lawyer release funds before land titles has completed its work (GAP coverage). Without it, we would need to wait to ensure that everything has registered correctly and that there are no other registrations on title before funds can be released. Land titles is only about 2-3 business days behind on their work so it is not very long, but the interest rate you pay to the seller under most purchase agreements if the bank has to wait a few days after closing to advance the mortgage is usually a little higher than the rate you are paying on your mortgage. This often pays for a portion of the title insurance premium by itself. That effectively makes the policy a little less expensive than it first appears to be, although honestly it's not that expensive considering you only pay once and it covers you as long as you own the property.

  • You purchase a property. The seller doesn't pay their utilities that were supplied by the municipality (not SaskPower or SaskEnergy). The municipality doesn't tell anyone on closing but after the next December 31, they will add the seller's utility arrears to your tax bill. It's rare but I have seen it happen. If you have purchased title insurance, they will generally pay them so long as you didn't know about it when your purchased. I have helped a client make that claim twice and it was paid quickly in both cases.

  • If the seller or someone before them didn't get proper permits from the city or municipality to build or renovate, or if there is something where the property does not comply with municipal bylaws, as long as you had no knowledge or suspicion of this, title insurance 'might' pay for the costs to remedy the problem if the city or municipality is requiring it. To know which would or would not be covered, you would need to examine the policy more closely but some of these types of problems are insured. With only a survey certificate, you would have no protection for something like this.

  • If someone makes a claim against your property afterwards, and it was never supposed to be your responsibility, then title insurance may help.

  • You purchase a newly constructed house or building or you buy a property that was recently renovated. The seller doesn't pay their bills so contractors register builders' liens against your property after you take title. If it wasn't supposed to be your obligation to pay and you obtained the policy before taking title, then the title insurance company will normally step in and deal with the problem to clear up your title. Remember that even though you feel you have a reliable builder working for you, how do you truly know their financial status and ability to pay all of their suppliers and subcontractors. I once had a client who, for their own reasons, decided not to buy title insurance on a new home purchase as the builder was a fairly large company. The builder went into bankruptcy a few weeks after they moved in. 13 liens were registered against the house after closing. I worked with my client to get them off, but it was expensive, stressful for them and time consuming. Title insurance would have taken care of everything.

  • If you are buying a new house, some builders use their own form of agreement. They often say that if your mortgage money isn't advanced to them right on the possession day (often out of the lawyer's control) the buyer must pay interest on that amount at 12% or some other very high interest rate. Sometimes the problem is created by the builder because their lawyer only gives us the transfer the day before closing. Sometimes our mortgage instructions only arrive at the last minute. The land titles takes a few business days to register and the lender won't advance their money until the land titles office is finished their work, unless there is title insurance. If there is no title insurance, it means paying a very high rate of interest until the mortgage company can give us their money. Title insurance can sometimes come close to paying for itself just on what it saves you on interest to the seller.

  • Identity Fraud: Someone pretends to be you. They fraudulently sign loan documents that are registered against your home while you are away. Maybe they sell your house and title is changed into someone else's name. The Saskatchewan land titles system has an "assurance fund" that will pay for most of this, but not necessarily all losses that you incur. Title insurance will pay for many expenses and losses from this fraud that the land titles system doesn't cover.

  • Title insurance will not cover defects or problems that you are already aware of when you purchased the property.

These are only a few examples of how title insurance may help you.

Lawyers Don't Make Money Selling Title Insurance

I don't make any money from helping clients buy title insurance if I am helping you purchase or mortgage property. You only reimburse my office for the exact amount we pay to the title insurance company. Because of that, I have no incentive to tell you to buy it unless I think it might be to your benefit. Sometimes a mortgage lender requires you to obtain it. If no one is requiring you to obtain it, it is purely your choice. I only let you know it is available and let you decide.

Is a Survey ever better than Title Insurance?

If you want to build a new fence or if you are having a dispute with your neighbour about where your property line is, then title insurance isn't going to give you the answer. A visual survey certificate will most likely help you find the answer to the problem.

If you are planning to build or dig on your land, a survey will often show where easements run below your land ... such as gas line easements. Title insurance can't show you where they run. However, most utility providers and cable or communication companies have a line locate service which often is free. If you call them, within a couple of days, they will send someone to your property and plant flags where their lines are planted underground to help you avoid them. This may take longer in rural areas so you will need to make some phone calls to find out.

Remember that the survey is only accurate to the date it was made. If you have a survey from 10 years ago, structures may have been added that don't show up on the survey. Lines may have been planted underground after that date. Not all surveys show underground easements either. Don't assume it will be complete. Order a line locate from everyone that might have something planted underground. That is the safest procedure to follow.

Who Sells Title Insurance?

We buy the title insurance for you. There is no advantage for you to buy it yourself as we don't charge or profit in any way and if a discount or rebate is offered, we give the benefit to you. Buying it yourself would only be a nuisance and it might even cost you more.

Some examples of title insurance companies operating in Canada are First Canadian Title Insurance Company Ltd., Stewart Title Guaranty Company, Chicago Title Insurance Company Canada and TitlePlus. I typically deal with First Canadian Title (FCT) because I have helped clients make claims under it without any issues, helping me understand their product better. However, I am sure the others offer good products as well and they are probably quite similar.

How Much and How Long Does it Last

  • Title insurance premiums are a one time charge when you first buy it. There are no annual premiums. Title Insurance typically covers the owner for as long as you own your property.

  • Title Insurance only covers the lender named on your policy. If you switch lenders or if you take out a new mortgage with the same lender, you'll need to buy title insurance for the lender again. If you are only renewing your mortgage where you previously paid for title insurance, you don't need to buy title insurance again.

  • If you increase the amount of your mortgage, but are keeping the same mortgage rather than signing a new one, then you can pay a smaller premium to increase the amount of coverage.

  • If for whatever reason you decide that you don't want title insurance coverage for yourself but you need it for your mortgage, the premium will be a bit cheaper ... but not by much. Usually the saving is anywhere from $0.00 - $25.00 on residential policies. For commercial policies this amount may be greater.

  • There are some lenders that automatically charge an "administration fee" when your mortgage is being funded, to pay a company to process the loan for them and title insurance that covers the lender. You have no choice about it and it doesn't matter if you have a survey. In these cases, you usually have the choice to pay something extra such as $100.00 - $160.00 to have coverage for yourself added to that policy.

  • Depending on the value of your property, a typical title insurance policy for a home can be in the $195-$241 range for an average home under $500,000. It depends on the value of the home or the amount of the mortgage. It will be more for expensive homes. Sometimes it is a bit less for new construction when there was a realtor involved in the sale. If you are borrowing money from a private lender or someone other than a bank, a trust company, a credit union or a large mortgage lender, title insurance will probably cost a little more. These are early 2023 numbers. For commercial policies, a very rough rule of thumb might be a bit less than $1.00 for every thousand dollars in value. For example, on a $1,500,000.00 mortgage, title insurance might cost very roughly in the range of $1,200 - $1,400.00 for lender only coverage. Covering the owner as well would be additional. I can't be more specific for this website article as these are charges by the title insurance company rather than me. They can change over time.
  • If You Already Own the Property

    If you already own a property, the title insurance company usually won't sell you a policy to protect yourself, but they will still sell it to cover the mortgage lender. That's because someone might discover a problem with the property they own and then buy title insurance to try to make a claim on it later. If you are in the course of buying a property, they will normally sell it. They do sometimes make some phone calls and check things out before selling a policy, to protect themselves. For example, if there is no realtor involved or there is something unusual about a transaction, they may do a bit of checking first, but not always.

    Notice:The information on this website is general in nature only. It relates to Saskatchewan, Canada and may not be applicable in your jurisdiction. It does not constitute legal advice to you and no solicitor client relationship will be established. A conflict check would also be required before our firm can act for someone. You should seek specific legal advice regarding your circumstances from a lawyer entitled to practise law in your jurisdiction.
    * Richard Carlson Legal Prof. Corp. | Saturday, Jul 20 2024 23:08 pm UTC1 (-6 hrs for Sask)