Title Insurance can be a confusing thing. It is certainly not unknown, because it is reportedly a part of "virtually every real estate transaction," but it is certainly confusing to many people in many respects. To some degree, participants in the process of obtaining it and explaining it sometimes seem to intend for it to be that way.
Title Insurance exists in basic terms to address or "cover" defects in title. Here is a popular explanation of what Title Insurance is intended to cover: "Defects in title include errors or omissions in deeds, mistakes in examining records, forgery, liens for unpaid taxes or contractor's bills, conflicting wills related to the home and missing heirs who suddenly appear and claim to own the property." This is what was posted by the Los Angeles Times Online on Friday, February 8, 2007 in an article bylined and entitled Scott J. Wilson, "The Title Insurance Toll/Consumers Usually Trust Recommendations From Real Estate Agents, Lenders and Builders -- And Risk Choosing Insurers Who Give Kickbacks to Boost Business" (Los Angeles Times Online, Fri., Feb. 8, 2008).
The price of Title Insurance in California is reportedly $1,200.00 - $2,000.00 for a $500,000.00 house. Those figures would make the Premium at something like a 1/250 ratio of Premium for Title Insurance/Sales Price of the Property. However, it is also reported in the above article that for "a house with a $400,000 mortgage, the policy would usually cost $500 to $600." That would be a ratio of more like 1/800 or 1/700.
In Iowa, the $500,000.00 house bears a Title Insurance Premium of $110.00 through Title Insurance run by the Iowa State Government. Other costs -- including lawyers -- reportedly raise the total to around $500.00. At the higher figure of $500.00, that ratio of Title Insurance Premium/Sales Price of the Property would be 1/1,000. Do not get too excited. Iowa is the only one of the 50 States to provide a "title insurance program" that is run by the government.
In 2006, Title Insurance Companies reportedly drew in revenues of $16,600,000,000.00 or $16.6 Billion. Revenues including Premium monies have undoubtedly declined since the subprime collapse, but figures are not reported in the linked newspaper article.
Whatever the decline in Title Insurance Company revenues in 2007, it is not because of paying claims, apparently. "While auto and homeowner insurers return about 70% of their premiums to customers in claims, title insurers pay out just 5%." The article linked above was apparently so good, that the Los Angeles Times Online offered a Sunday version, to which you can link here: Scott J. Wilson, "The Trouble With Title Insurance/Consumer Groups Say Policies Are Overpriced; Home Buyers Have Little Choice But to Pay" (Los Angeles Times Online, Sunday, Feb. 10, 2008).
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