What is Title Insurance?
Why do I need title insurance?
For most Americans, our home is the single largest financial investment we will ever make. While ownership of our home may seem very straightforward, our rights to enjoy our property aren't always as clear. There are literally dozens of ways in which your title to, and ownership of, the property can be jeopardized. The title insurance policy ensures that title issues will not affect your home ownership rights.
Two basic kinds of title insurance
Owners Coverage - for the buyer
Lenders, or mortgage, protection - for the lender
Owners title insurance protects the buyer and is issued in the amount of the real estate purchase and lasts as long as the insured - or his/her heirs - have an interest in the property covered. This may even be after the insured has sold the property.
The lender policy protects the lender and the title insurance decreases and eventually disappears as the loan is paid off. Most lenders require mortgage title insurance as security for their interest in real estate, just as they may call for fire insurance and other types of coverage as investor protection.
Generally both policies are issued simultaneously during the title insurance process.
Protect your home with title insurance
Even the most thorough, detailed title search can sometimes not catch every potential title problem. So when you buy a home, insist on protecting your investment with an Owner's Policy of Title Insurance.
If you have an Owner's Policy and a title problem is found later - even decades later - the title professional will resolve the problem and, if necessary, pay for a lawyer to defend your title claim.
Title insurance rates
A common concern of today’s homeowner is the question of who sets the fees charged for title insurance and title searches. Are they state regulated or set by the individual title companies? Can a set fee be negotiated or modified in any way? Both buyers and sellers often take these rates at face value, accepting them as set forth by the title company or closing agent without question.
The truth is, title insurance fees will vary from state to state, and may not be governed by law in every state. Many states will allow each title company to set its own rates and then will file those fees with that state’s insurance commissioner. Once filed, the set fees must be adhered to. Other states may utilize a rate called a "promulgated rate" which is the minimum amount set by state law which a title company must charge for title insurance and title searches. The title company, if it chooses, has the authority to increase this rate as it deems necessary.
All this may sound confusing to you, the homebuyer; however the point to take is that you should question your title or closing agent at the beginning of your escrow as to what charges will be included for title insurance. Questions might include asking if your closing agent is charging the lowest rate allowed by state law? You may even want to shop around for title insurance and closing fees. Chances are you will find that the fees will vary from title company to title company.
Even a small degree of savings would be worth your time and effort in shopping for the best rate. The fact that there are many closing costs which are not negotiable and which you will be required to pay for, any saved expenditures in the final closing fees will be appreciated. Sellers can benefit from this as well if you are required to pay for the title insurance. Any savings would be reflected in the amount of money you receive back with your sales proceeds.
It is common practice among many title companies to combine the title insurance premium together with the closing, search and exam fees and this may even be the industry standard for your state. This rate goes up proportionally with the sales price. There might be additional fees if any endorsements are required. Your title company or closing agent will be able to give you the exact fees they will be charging for your title closing costs.