How to Save Money on Title Insurance Premiums
In 1988 when California voters passed the insurance reform act known as “Prop 103." Until then all insurance premiums were fixed by a small oligarchy of companies that controlled policy pricing.
In 1990 California voters were allowed for the first time to vote on the elected position of “insurance commissioner."
Garamendi instituted a host of reforms that included the publication of title insures “basic” rates.
Title fees are now published by the California Department of Insurance.
Consumers shopping around for rates should begin their search at: titlewizard.com.
How to Shop Premiums
And Save Big
Studies by the California insurance commissioner’s office show that consumers lack the access to information to adequately “shop” for title insurance for the best prices.
Unlike the easy access consumers have to auto and home insurance agents, most title insurance sales pricing is cloistered so deep into the home buying process that buyers are unaware of the gouging that is taking place.
With homebuyers having little access to insurance industry sales people (“title reps”), a consumer’s best bet to obtain the lowest possible “premium” price is to use their escrow officer as a “proxy shopper."
When consumers ask for a premium “quote”… title reps often defer to the escrow officer who is conducting the (sales) transaction. It is common for the title rep to simply ignore the consumer’s request (in writing) for a discount in a title insurance policy. The title rep simply relies on their agent or escrow officer “to sell” the premium at the close of escrow.
Unlike mortgages which (who are mandated by federal laws) to disclose rates and fees (within three days off application), insurance premiums are not disclosed until the homebuyer is at escrow and signing the final paperwork.
Only by demanding pricing estimates before escrow is “opened" can homebuyers truly be able to shop and compare rates from one title company to another.
A History of Title Insurance
What is a title?
A grant deed is document that grants "ownership" to or "interest" in - right to receive rent - a piece of property. Title is the person or corporation that is named on and "holds title" to the grant deed.
What is a title search?
A title search is a history of all transactions listed in the public records affecting a specific tract or parcel of land.
These records include encumbrances, deed restrictions liens, deeds, court records, property and name indexes, and public documents. The search may also include the right of ingress and egress, contiguous parcels of adjoining land and any public easements that allow for public utility companies to access the land. In addition the title search will address the oil and mineral rights that are below the surface (usually limited to 6 feet).
The overall purpose of a title search is to assess the seller’s interest in the parcel and the right to transfer ownership.
What is title insurance?
Title insurance is a policy of protection for both you and your lender against a claim and subsequent loss against your property ownership.
These losses are due to:
Mental incompetence claims from the heirs of previous owners
Identical names that cloud title
These “defects” often are produced by a litigant after you’ve purchased your home and can threaten clear title to your home. These issues of contested ownership are often known as “clouds on title."
What Is A Statement of Information?
A statement of information is a form routinely requested from the buyer, seller in a transaction where title insurance/ policy is purchased. Upon completion the form provides the title company with the applicant’s information such as:
Full Name (jr.sr.)
Date of Birth
Social Security Number
Current Residence
Past addresses (up to 10 years)
Citizenship
Employment Information
Previous marriages if you are divorced
The information is confidential used in completing the search of records necessary before a policy of title insurance can be issued.
A properly completed Statement of Information allows the title company to differentiate between parties with the same or similar names when searching documents.
How does title insurance protect ownership?
Once ownership has been transferred and (if) a claim is made against your property, the title Company will defend you against litigation.
That defense pays court costs and related fees. If the claim proves valid, you may be reimbursed for your actual loss (up to the face amount of the policy).
Why are there two policies (premiums)?
There are two different types of policies –
1) A loan policy that protects the lender’s interest for the outstanding balance of your loan.
2) An owner’s policy. The owner’s policy protects the buyer’s interest in the amount of the purchase price of the property. If a buyer pays “cash” there is only one policy.
How is pricing determined?
Insurance companies publish their “official” premium pricing on line with the California Department of Insurance.
These rates represent insurance companies “asking price”.
Consumers shouldn’t hesitate to shop one company against another to get a lower “unpublished rate."
How long does coverage last?
Coverage lasts for as long as policyholders or their heirs remain on title. Should the policyholder refinance his current mortgage, an entirely new policy will required by your lender.
Homeowners find this particularly objectionable since there is already a title policy in place.
Consumer activists maintain that price fixing and collusion are the reason homeowners pay for entirely new policy when a “rider policy” (for the time of residency) is a better alternative.
Industry watchdogs including former Commissioner John Garamendi (who was elected again in 2002) concluded in 2005 there is a “lack of competition” that has led to “excessive prices in California."
In 2004 Garamendi issued new regulations which were quickly challenged by industry lobbying groups. In a case that went to the California Supreme Court, consumers and Garamendi lost in their challenge of the industries anti-competitive practices in 2005.
Upon being elected to Lieutenant Governor in 2006 Garamendi has taken the consumers fight to the California legislature.
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