Title Insurance and Home Insurance Before Closing in BC: What Buyers Actually Need

Two kinds of insurance, two different jobs

Buyers often ask whether they need "real estate insurance" before closing. There is no single product by that name. What you actually deal with is two separate policies that protect against completely different things.

Home insurance: why it starts before you have the keys

This is the timing detail that catches buyers out. The standard BC Contract of Purchase and Sale has a risk clause. As BCREA's Legally Speaking series explains it, all buildings on the property remain at the seller's risk until 12:01 am on the completion date, and after that the risk passes to the buyer.

Completion is the day the money changes hands and the title transfer is registered. Possession, when you get the keys, is usually a day or more later. So for at least a day, you own a home you can't walk into, and if something happens to it during that time, it is your loss to deal with. BCREA's guidance is for buyers to have insurance start at 12:01 am on the completion date and for sellers to keep their own policy until after possession, so both sides are covered during the overlap. I walk through the full sequence in what happens on closing day in BC.

Your lender needs it too. Mortgage instructions commonly ask for the lender to be added to your policy under the Insurance Bureau of Canada standard mortgage clause and named as the first loss payee, with coverage of at least the mortgage amount or the full replacement cost, whichever is lower. Your lawyer or notary confirms this from your insurance certificate or binder before the funds are advanced. Leave it to the last week and you risk a delay on completion day.

Make sure the home is insurable before you firm up

For most homes, getting insurance is routine. For some it isn't. Older homes with active knob-and-tube wiring and homes in wildfire-prone areas near forest are common examples where insurers may ask more questions or decline to bind. In 2019 the Insurance Bureau of Canada and BCREA jointly recommended that buyers include an insurance clause in their offers and arrange insurance early, particularly if completion falls in wildfire season. I explain how a "subject to insurance" condition works in the subject removal guide, and why some inspection findings affect insurability in inspection subjects in BC.

Buying a condo or townhome: the strata policy and your own policy

In a strata, there are two layers of insurance and you need to understand both before you remove subjects.

The strata corporation's policy. According to the Province of BC, the strata must insure common property, common assets, the buildings shown on the strata plan and the fixtures the developer originally installed in each strata lot, for full replacement value, plus at least $2 million of liability coverage. It does not cover your belongings, your personal liability, or your costs to live elsewhere after a loss.

The deductible is where buyers get hurt. The Province says strata deductibles commonly run to tens of thousands of dollars, and in many buildings $100,000 to $750,000 or higher, and earthquake deductibles are usually a percentage of the building's full replacement value, typically 10% to 20%, not a percentage of the loss. Under section 158 of the Strata Property Act, a strata can recover the deductible from an owner who is responsible for the loss, and negligence doesn't need to be proven unless the strata's bylaws set a higher standard. If a leak starts in your unit, you could be facing the strata's water deductible.

Your own policy (often called a condo or unit-owner policy) fills those gaps. The Province lists what owners should consider:

• Deductible coverage for some or all of the strata's deductible if you're found responsible.
• Contents, at replacement cost.
• Improvements and betterments made by you or previous owners, such as upgraded flooring or kitchens.
• Personal liability for injury or damage you unintentionally cause to others.
• Additional living expenses if you have to live elsewhere after an insured loss.
• Coverage toward special levies if the strata's deductible exceeds your policy limits.
• Earthquake coverage, including your share of the strata's earthquake deductible if the strata carries earthquake insurance.

How I handle this for buyers. When I review strata documents, the insurance deductibles are the second thing I read, right after the Form B. The strata's insurance summary should come with the Form B when it's requested. I note every deductible (water, sewer backup, earthquake and the general one) so you can ask your insurance agent to match your own deductible coverage to the highest of them before subject removal. My full reading order is in how I review strata documents. Climbing deductibles from one renewal to the next are also one of the signals I flag in the special levy guide.

Title insurance: what it is in BC, and why it still exists here

BC's land title system is based on the Torrens system: the Land Title and Survey Authority (LTSA) keeps the register, and the LTSA has said it is legally obligated to confirm ownership every time a property is sold or mortgaged. If an owner is deprived of title because of an LTSA error or identity fraud, BC's Assurance Fund exists to compensate them. In 2021 the LTSA told Greater Vancouver REALTORS® that title fraud was, at the time, extremely rare in BC and that it knew of no case where an innocent owner had to pay off a fraudulent mortgage on their property.

So why does title insurance exist here at all? Because the register guarantees who owns the land. It doesn't guarantee everything about the property, and making a claim against the Assurance Fund is not the same as having an insurer pay. A BCREA Legally Speaking column on title insurance (from 2000) pointed to human error, gaps in coverage and the Assurance Fund not fully covering losses and legal fees as reasons title insurance can be the cheaper way to fix a problem. The law has changed since then, so ask your lawyer or notary how those reasons apply today.

What title insurance typically covers

Coverage depends on the insurer and the policy wording, including its exclusions, but title policies commonly cover losses from problems that existed before your policy date, such as:

• Fraud and forgery, including documents signed by an impostor.
• Encroachments, such as a fence, garage or deck that crosses a property line.
• Zoning and building permit problems, such as work done without a valid permit or a use that doesn't comply with zoning.
• Errors in public records and existing liens that weren't cleared.

What it doesn't do: title insurance doesn't prevent these problems. Most coverage is for problems that existed before you bought, although many owner's policies also cover some later events, such as title fraud after closing. Check the policy wording and exclusions with your lawyer or notary. A lender's policy protects the lender, not you. If you want your own protection, it has to be an owner's policy.

Lender's policy vs. owner's policy

Many mortgage lenders require a lender's title policy as a condition of financing, and the buyer typically pays its premium at closing. An owner's policy is generally optional. Either way, it's a one-time premium, and an owner's coverage lasts for as long as you own the home. Your lawyer or notary will usually raise it when they open your file. I don't quote premiums here because they vary by insurer, price and property. Ask your lawyer or notary for the exact figure, and see the closing costs guide for where it sits in your overall budget.

Questions worth asking your lawyer or notary:

• Does my lender require a title policy, and does it protect me or only the lender?
• Would an owner's policy cover anything specific to this property, such as an older addition, a secondary suite or a structure near the lot line?
• What are the main exclusions in the policy you recommend?

Fraud on the money side: protect your down payment

The bigger real-world risk for most buyers isn't a forged title. It's a fake email. Fraudsters target real estate payments by sending altered wiring or payment instructions that look like they came from a lawyer, notary or brokerage. BC's real estate regulator warned licensees as far back as 2015 that any change in payment instructions may be fraudulent, and the same scam is still in use.

• Get your lawyer's or notary's trust account details at the start of the file, and confirm them by phone using a number you found yourself, not one in the email.
• Treat any "updated banking details" email as suspect until you have confirmed it by phone.
• If your lawyer or notary suggests sending a small test amount first, confirm it arrived before you send the rest.

After you own the home, the LTSA has introduced BC Property Connect, a service that lets residential owners create a secure digital connection to their property and be alerted when something changes on their title. It is still in its early-adopter stage, so check the LTSA site for the current details.

From subject removal to keys: your insurance timeline

Frequently asked questions