The Cost of Title Insurance

If you’ve ever purchased an auto or health insurance policy, you probably have an idea of ​​​​how traditional insurance coverage works: You pay for the policy, and the insurance company assumes financial responsibility for your auto or health risks. Of course, your rates will adjust according to the level of “risk” you present.

These types of insurance assess the risks of future losses, such as car accidents, health problems, and other mishaps. Title insurance, on the other hand, helps to eliminate risk – risk is the loss or danger of jeopardizing property rights due to existing title problems. The policy then offers financial compensation against any of these deficiencies that may be discovered.

To Reduce Risk

In order to properly eliminate risk, the process of issuing the title insurance policy includes an in-depth study of public records and legal documents to evaluate and eliminate any “blemishes” or problems with the title to the property.

Claims

Since statistics indicate a low percentage of claims filed with title companies each year, it can be difficult for property buyers to estimate the value of their purchase. However, the low number of claims really illustrates the effectiveness of title insurance providers in locating and minimizing risk. In fact, a large part of the premium paid for the policy pays for the work required to do a thorough title search on a property. According to the American Land Title Association, the typical expense ratio for a title insurance company is 90 percent, compared to 30 percent for a casualty insurance company.

Rates

Since it is a highly regulated industry, the types of insurance policies and the costs vary from state to state. You can check with your state Department of Insurance for more information on price regulations. In general, the price of each policy is based on the purchase price of the home (for the homeowner’s policy) or the total amount of the loan (for the loan policy).

Coverage Duration

Also, unlike other types of insurance, purchasing an owner’s title insurance policy is a one-time purchase; There are no premiums to pay in the future, as long as you or your heirs retain an interest in the property. That means that this fee, which is usually paid when you buy the property, will protect you and your family indefinitely, for as long as you have an interest in the property.

That said, if you refinance your home, the lender will probably require you to purchase a new policy, since this type of insurance protects the lender only for the term of the loan. Your homeowner’s policy, however, will remain in effect.

Options

Although real estate agents often influence which insurer to choose, you as a consumer have the right to determine who your provider will be. It may be beneficial to do your research to determine which company is best suited to your needs.