Title Insurance: The Goal is Risk Elimination, Not Risk Assumption
Title Insurance: As a homebuyer, the term is probably familiar - but is it understood? What is your dollar actually paying for when you purchase a title policy?
Risk Elimination vs. Risk Assumption
Title Insurers, unlike property or casualty insurance companies, operate under the theory of risk elimination. Title companies spend a high percentage of their operating income each year collecting, storing, maintaining and analyzing official records for information that affects title to real property. Their technical experts are trained to identify the rights others may have in your property, such as recorded liens, legal actions, disputed interests, rights of way or other encumbrances on your title.
The distinction is important: title insurance premiums are paid to identify and eliminate potential risks and claims before they happen. Medical and casualty insurance premiums, for example, are paid to insure against an unpredictable future event, knowing that risks exist and claims will occur.
What Your Premium Covers
- recorded liens
- legal actions
- disputed interests
- rights of way or other encumbrances on your title
The issuance of a title insurance policy is highly labor-intensive. It is based upon the maintenance of a title plant, or library of title records, in many cases dating back over a hundred years. Each day, recorded documents affecting real property and property owners are posted to these title plants so that when a title search on a particular parcel is requested, the information is already organized for rapid and accurate retrieval. This investment in skilled personnel and advanced data processing represents a major part of the title insurance premium dollar.
Claims and Comparison Shopping
The goal of title companies is to conduct such a thorough search and evaluation of public records that no claims will ever arise. When claims do arise, professional claims personnel are assigned to handle them according to the terms of the title insurance policy. As in all competitive business environments, rates vary from company to company, so you should make comparisons before deciding on a particular title company. Your real estate professional can help you do this. In addition, there are many helpful customer services provided by title companies which you and your real estate professional may find helpful to your transaction.Article by CLTA
