﻿ Questions About Title Insurance - Mortgage Professor

Questions include: what is title insurance, is it obligatory, does it protect the borrower as well as the lender, when does protection begin and end, does the amount of coverage increase with the value of the property, why does the cost vary in different parts of the country, and does it pay to shop?

Questions About Title Insurance
December 16, 2002, Revised January 25, 2006, November 27, 2006, September 5, 2007, December 6, 2007, May 21, 2009, January17, 2012

What Is Title Insurance?



Is Purchasing Title Insurance Obligatory?


Does Title Insurance Do Anything For Me?


Doesn't the Lender Policy Indirectly Protect Me?

No, title policies are indemnity policies, they protect against loss, and a lender policy would only cover the lender's loss. Of course, the fact that the insurer issued a policy to the lender indicates that the title has been searched and nothing amiss has been found, but no search is 100% dependable. That is why an insurance policy is issued.

When Does Title Insurance Protection Begin and End?


For How Long Is the Property Owner Purchasing Title Insurance Covered?











Subject to state law, insurers generally offer to extend the existing policies of borrowers who refinance at a discount from the standard premiums. The periods for which the discounts are available vary by state, ranging up to 15 years in Massachusetts. BE SURE TO ASK FOR THE DISCOUNT, IT MAY NOT BE OFFERED IF YOU DON'T.



Are Title Insurance Premiums Fair to Low-Income Borrowers?






To complicate it further, in some states the charges for title-related services are paid to title insurance companies, which perform the functions but charge separately for them. In other states, borrowers may pay attorneys or independent companies called abstractors or escrow companies.




However, this has begin to change with the development of the internet, and one new insurer has emerged to market directly to borrowers. See Buying Title Insurance on the Web: Entitle Direct. Borrowers who seek a mortgage on this web site from a Certified Network Lender can also price and buy title insurance from Boston National See Why Shop Here: Shop for Third Party Services.



I would certainly shop in states that do not regulate title insurance rates: Alabama, District of Columbia, Georgia, Hawaii, Illinois, Indiana, Massachusetts, Oklahoma, and West Virginia.

You would be wasting your time shopping in Texas and New Mexico because these state set the prices for all carriers. Florida also sets title insurance premiums but not other title-related charges, which can vary.


The question is further complicated by the fact that title agencies, which actually write the policies and receive most of the premium as commission income, may share their commission with borrowers in some states. The fact that all the insurers in a state charge the same premium doesn't necessarily mean that all the borrowers in the state pay the same premium.

It is a good idea to ask an informed but disinterested local whether it pays to shop in the area where the property is located. Just keep in mind that those likely to be the best informed are also likely to have an interest in directing your business in the direction that is most advantageous to them.

Are Title Insurance Premiums Deductible?

Under existing rules, they are not. If the tax code was logically consistent, however, premiums paid by borrowers on lender policies -- those that protect only the lender -- would be deductible. The same is true of mortgage insurance. See Are PMI Premiums Deductible?