How does title insurance differ from other forms of insurance? Below is a description of what title rates cover and how they are obtained.
The majority of the one-time title insurance premiums cover the cost to discover, identify, and work with the consumer to repair events that have occurred in the past. Before the actual policy is issued, the title examiner and/or title unit examines the history of the property contained in the public record. In order to make sure a homeowner has a clear title, the examiner will scrutinize prior deeds and mortgages, superior court matters; divorce decrees, judgments, taxes, child support, federal bankruptcy matters, federal tax liens, vesting, covenants and restrictions, and utility and other easements in favor of third parties.
Due to these preventative measures, title insurance pays out significantly less in claims and is fundamentally different from all other forms of insurance, which charge annual premiums to provide insurance protection from future events. The heavy concentration of work up front minimizes fear, disruption and distress that title claims have on home ownership.
Not only does the title insurance company have the responsibility of searching the public record, but they must also defend against hidden risks that may cause a loss of title or create an encumbrance on title, for example:
– False impersonation of the true owner of the property
– Forged deeds release or wills
– Undisclosed or missing heirs
– Instruments executed under invalid or expired powers of attorney
– Misinterpretations of wills
– Deeds of persons of unsound mind
– Deeds by minors
– Deeds by persons supposedly single, but in fact married
– Liens for unpaid estate, inheritance, income or gift taxes
– Fraud
Title insurance rates are regulated by the state governments, in our case, the Washington State Insurance Commissioner’s office. Washington State is a “file and use” state, which means the insurers propose the rates, but the rates cannot be used until the regulatory body has been notified and allowed time for review and action if necessary (Washington State has a 15 day wait period).
Title companies compete with nearly identical products, based on title policy forms developed by the American Land Title Association. As a result, the areas for competition have shifted to price and service. Being that prices have to be competitive with each other, SERVICE is the key.