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CostHelper > Personal Finance  > Real Estate > Title Insurance

Title Insurance Cost


How Much Does Title Insurance Cost?

 
 average costMedium: $350-$2,000+ 
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Title insurance is one of several closing costs involved with purchasing a home. Nearly all mortgage holders must carry title insurance, which protects against property loss or damage from liens, encumbrances or the defects in the property title, which serves as evidence that the owner is in lawful possession of that property.

Typical costs:

  • Title insurance is a one-time, up-front mortgage closing cost based on the size of the residence and how much of the home's value is being insured. There are two options for title insurance: lender's and owner's. A lender's policy covers only the loan amount for the mortgage. It protects the financial institution, or lender, from any problems with the title. An owner's policy covers the total value of the residence, so it would cover any down payment or other cost above and beyond the loan amount on the mortgage.
  • The premium for either a lender's or an owner's policy is based on the home's value, and can vary depending on state or county, according to the Federal Reserve[1] . It typically costs about $1.75-$9 per $1,000 of the home's value, or about $350-$1,800 on a $200,000 home, or $700-$2,000 or more for a $400,000 home. An owner's policy, if purchased separately, would typically cost more than a lender's policy because the owner's policy covers a higher amount.
Related articles: Closing a Home, Mortgage Insurance, Homeowner's Insurance

What should be included:
  • Title insurance[2] differs from other forms of insurance in two ways. First, it is a one-time premium, rather than one that is paid regularly.
  • Secondly, while most insurance -- such as car or life insurance -- covers potential future events, title insurance provides protection against undiscovered past events. Such events could include a building contractor filing a lien on the property or the discovery of a forged signature in the transfer of the title, rendering that transfer invalid. Title insurance would enable the buyer and the lender to prove in court that they own the property outright.
  • The claims rate for title insurance is low, at about 4%. That's because part of title insurance companies' duties is to conduct public record research before the policy is set to catch any problems. However, some problems that may arise can't be found in public records.
Additional costs:
  • Extended title insurance, also called "premium" or "enhanced" title insurance, covers additional problems that may be attached to the title, such as appreciation in property value, encroachments, permit violations and easements. This insurance costs about another 10% on top of the standard policy.
Discounts:
  • Discounts are available on refinances, and short-term rates are sometimes available when buying a new title insurance policy on a property that has been purchased in the previous two to five years. Both of these cost about 50% less than their full-price counterparts, or about $400 on a $200,000 home.
  • Usually, new homeowners take out both a lender's and an owner's policy at once, and pay a discounted rate for doing so. The average cost for both a lender's policy and an owner's policy, taken at the same time on a $200,000 home, was about $859, according to BankRate.com.
  • Discounts of 5%-30% may be available to first-time homebuyers, professionals such as lawyers or teachers, or seniors.
  • In some states, owners and lenders share the closing costs. Check with a real estate agent or the state's Department of Insurance to find out what is typical in the state and county where the home is being purchased.
Shopping for title insurance:
  • States regulate title insurance. In the subprime mortgage crisis fallout, trade groups, such as the National Association of Insurance Commissioners and the Center for Insurance Policy and Research, are researching ways[3] to reform, streamline and standardize title insurance. Use the association's interactive map[4] to find contact information on a particular state's Department of Insurance, which can provide information on recent regulations affecting title insurance and homeowner's rights.
  • NAIC notes that, while a title insurance company is usually suggested during the mortgage closing process, homebuyers are under no obligation to use that specific title company. NAIC has more tips[5] on buying title insurance.
  • BankRate.com offers six questions[6] to ask when shopping for title insurance.
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External Resources:
  1.  www.federalreserve.gov/pubs/settlement/default.htm#own
  2.  www.mtgprofessor.com/a%20-%20title%20insurance/questions%20about%20title%20insurance.htm
  3.  www.naic.org/committees_c_title_tf.htm
  4.  www.naic.org/state_web_map.htm
  5.  www.naic.org/documents/consumer_alert_title_insurance.htm
  6.  www.bankrate.com/finance/mortgages/6-questions-to-ask-about-title-insurance-1.aspx
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