How to Shop for Title Insurance and Compare Quotes

Title insurance protects against financial losses from defects in a property’s title. Unlike homeowner’s insurance, it addresses issues that occurred in the past, before the property was acquired. For many, purchasing a home is a substantial financial commitment, and title insurance helps safeguard that investment. It provides assurance that the property’s ownership is clear and free from undisclosed claims or encumbrances, ensuring a secure transaction.

Understanding Title Insurance Coverage

Title insurance comes in two forms: Lender’s Title Insurance and Owner’s Title Insurance. Both protect against title defects that existed prior to the property’s purchase date. These defects can include errors in public records, forged documents, undisclosed heirs, or unpaid liens and taxes from previous owners.

Lender’s Title Insurance is often a mandatory requirement when securing a mortgage. It protects the financial interest of the lender. The coverage amount typically matches the loan amount and decreases as the mortgage principal is paid down. This policy ensures the lender’s lien on the property is valid and enforceable.

Owner’s Title Insurance protects the homeowner’s equity and investment in the property. While often optional, it provides coverage up to the property’s original purchase price. This policy remains active for as long as the homeowner or their heirs retain an interest, offering protection against potential legal fees and financial losses if a covered title dispute arises. It covers issues such as boundary disputes or undiscovered easements.

Factors Influencing Title Insurance Costs

The cost of title insurance is influenced by several factors, with the property’s value being a primary determinant. For an owner’s policy, the premium is generally based on the property’s selling price. A lender’s policy premium is tied to the mortgage loan amount. A higher purchase price or loan amount will typically result in a higher insurance premium.

The geographical location of the property also plays a role in determining costs. Title insurance rates can vary by state or even county, as some regions may have regulated rates or different market conditions. The complexity of the title search and examination process, which involves reviewing historical public records, can also affect the overall cost.

Additional endorsements or services requested also influence expenses. Endorsements are riders added to a policy to expand or limit its coverage, usually incurring an additional fee. The total closing costs for a real estate transaction often incorporate these title insurance premiums along with other related fees, such as search and examination charges.

Steps to Obtain and Compare Quotes

Securing title insurance involves a few steps to compare options. Gather all necessary property and transaction details, including the full property address, the agreed-upon purchase price, and the loan amount if financing. Having this information readily available will allow title companies to provide accurate quotes.

Reach out to multiple title companies for quotes. While real estate agents or lenders may offer recommendations, consumers have the right to choose their own title service provider. Obtaining at least two to three quotes from different companies is advisable, as rates and fees can vary. In some states, rates may be regulated, meaning premiums are consistent across companies, but other fees might differ.

When comparing quotes, examine the total cost, not just the premium. Look for an itemized breakdown that includes the premium amount, along with other fees such as closing fees, search fees, and settlement charges. Ensure that the coverage details and any exclusions are clearly understood for an “apples-to-apples” comparison. Some companies may also offer discounts, such as a reissue rate if the property was recently insured or refinanced.

Reviewing the Title Commitment

After a title company conducts its initial search, it issues a title commitment. This document acts as a promise to issue a title insurance policy, outlining the conditions and exclusions under which the policy will be provided. It is a crucial step in the real estate transaction before the final closing.

The title commitment consists of several key sections that warrant careful review. Schedule A details the basic facts of the transaction, including the effective date, the property’s legal description, the names of the current and proposed owners, and the proposed policy amounts for both owner’s and lender’s insurance. Verifying the accuracy of these details against the purchase contract is important.

Schedule B-I, often referred to as the “requirements” section, lists all conditions that must be satisfied before the title insurance policy can be issued. These requirements frequently involve actions such as paying off existing mortgages or liens, resolving outstanding judgments, or correcting legal descriptions. Schedule B-II outlines the “exceptions” to coverage, which are specific matters the title policy will not insure against, such as certain easements, restrictive covenants, or mineral rights. Understanding these exceptions is important as they may affect the future use or value of the property.