What is title insurance and do I actually need it?
A one-time premium covering title fraud, unknown title defects, survey and encroachment problems, and some municipal work orders. Your lender requires a policy regardless; the owner's coverage on the same policy is the part that protects you.
It insures ownership rather than the building. What it covers: someone fraudulently transferring or mortgaging your property, a defect in title nobody found, a boundary or encroachment problem that would otherwise need a new survey, unknown liens, and in many policies certain outstanding work orders.
What it does not cover: physical condition. That is the inspection's job, and no policy will pay for your furnace.
Since your lender requires a policy anyway, the marginal cost of adding owner's coverage is small relative to what it protects. Title fraud in the Toronto area has produced cases where properties were mortgaged or sold out from under their owners, and litigating that without coverage is ruinous.
It also often removes the need to buy a new survey, which is why it is usually cheaper than the alternative. Confirm with your lawyer that the policy includes owner's coverage and not just the lender's.
Next questions
Do I need a survey of the property?
Usually not, because title insurance covers most of what a survey would reveal at a fraction of the cost. You need one when you are planning to build, or when there is a real boundary question.
Ontario
What does a real estate lawyer actually do for the fee?
Searches title and clears defects, executes searches against the property and the parties, takes your lender's instructions, calculates and remits land transfer tax, prepares the statement of adjustments, and registers the transfer and the mortgage.
Ontario