What is title insurance, and how is it used in Alberta residential transactions?

Q: What is the correct answer to: What is title insurance, and how is it used in Alberta residential transactions?

The correct answer is Insurance that protects the buyer and/or lender against losses from title defects, survey issues, fraud, and certain risks not revealed by a title search. Title insurance in Alberta covers losses from title defects, fraud, survey discrepancies, encroachments, liens, and other risks not discoverable through standard title searches. It is governed by insurance regulations and issued as a one-time premium policy. Alberta's Land Titles Act provides a Torrens system assurance fund, but title insurance offers broader coverage.

Q: What background knowledge is needed for this Residential Trading question?

Alberta operates under the Torrens land title system, which provides a government-backed assurance fund for title defects. Title insurance provides additional coverage beyond the assurance fund, including survey issues, bylaw violations, and fraud. The one-time premium is typically paid at closing and the coverage lasts as long as the insured has an interest in the property.

Q: What is a good way to remember the answer to this Residential Trading question?

Think: property insurance looks forward (future damage), title insurance looks backward (existing hidden problems). It protects against what already happened but was not discovered. When distinguishing title insurance from other insurance types, remember it covers past and existing issues — defects, fraud, survey problems — not future events.

Q: What exam tip applies to this Residential Trading question?

Title insurance protects against existing unknown defects, not future damage. It covers title defects, fraud, survey issues, and encroachments — remember it is optional but increasingly common.

Q: How does this Residential Trading concept apply in real world practice?

A buyer purchases a home in Lethbridge and obtains title insurance. Two years later, a neighbour produces evidence of an unregistered easement across the property that was not discovered during the title search. The title insurance company covers the legal costs and any financial loss resulting from the claim.

Question

Residential TradingABMEDIUM

What is title insurance, and how is it used in Alberta residential transactions?

Answer Options

A

Insurance that covers the market value of the home

B

Insurance that protects the buyer and/or lender against losses from title defects, survey issues, fraud, and certain risks not revealed by a title search

C

Insurance required by all Alberta municipalities

D

Insurance that replaces the need for a lawyer in the transaction