Opting Out of Title Insurance

Exceptions in Title Insurance Policies - Make Sure to Read Fine Print

If you get title insurance, make sure to look at the exceptions carefully. One of the exceptions to my title insurance policy is that I'm not covered if there is a challenge to my boundaries unless I purchase extra insurance and have an additional survey. It seems as though I'm not really covered on anything that hasn't come up on the title search already unless I pay for extra coverage, so I'm not sure what really comes with the basic coverage. I personally don't think I need the boundary coverage, but just check into this because it could make a big difference in what kind of protection you get.

For example, my builder is just finishing building my house and the title search revealed a number of mechanics liens already. Unless I buy extra coverage to cover mechanics liens that haven't been filed yet, I won't be covered for new liens even if my title is clear the day of closing. I could face liens on my property for the contractor's unpaid bills. Since my contractor has not paid many of his bills, it seems like there will probably be more liens on my property after I close because the time limit for filing liens has not expired. I'm glad I read the fine print because I definitely want this extra coverage.

Ti of NM @ Aug 14, 2008 18:51:13 PM

Title Insurance/Title Claims

The articles reference to the fact that title insurance will kick in and pay court costs on a boundary dispute is a very example of how title insurance protects against more than just simple vetsing of the ownership in land. For the most part the best way to think about title insurance is a product guarantee. It is a one time fee that covers one as long as they own the property with an owner's policy and covers the lender's interest for the life of the loan with a loan policy. Many liens or defects in title are discovered before the closing and thus cleared up then to ensure clear title and all liens are satisfied when property is sold. It is a type of insurance that you hope you never have to use, like fire insurance, but you would be in a bad place without if you ever needed it. There are many many things that can effect ownership and interests in property, the smart thing to do is get title insurance so that you are covered in case one of these many things surfaces and affects your property.

Sorry to disappoint claims guy (Peter A. of VA), but your analysis of the amount of claims is slightly off base. The reason the underwriters are adding to their claims reserve and that there will be more claims is a result of the cycle in the real estate market. Title insurance is not unlike other parts of the real estate industry that are effected by the ups and downs of the market. When volume is high title insurance companies make large amounts of money which they can use to build reserves for the not so great times or invest in technology as the industry is ever changing and tough to keep up with. This also attracts others to join the industry in hopes of a quick buck. Problems resulting in claims do take some time after closing to come to light. Claims will go up for two reasons: 1) Just a couple of years ago the title industry experienced two record high years in a row in business volume. More volumes means more claims, even if the claim percentages stay in the 5-6% range. 2) These others entering the industry that I mentioned before can also affect claims. Some new to the title insurance industry are only attracted by their visions of easy money. They are not always interested in doing the job right and these types will go away as quickly as they showed up when the business volume drops again. The poor work of these extras to the industry can result in and increase in the amount of claims as well.

Please don't think that I believe that all new title insurance companies are bad. That is not belief at all I am just under the opinion that, like other industries, a up turn in the market attracts many new players to the field. This increase can include some companies that do not offer the same quality of product or expertise as those that have been in the industry for say 100 years. These not so great companies typically compete with price alone. It is kind of like buying cheap trash bags. It is nice to save a buck at the store, but not so nice later when you are picking up all of your garbage off of your kitchen floor.

Jeremy D. of MO @ Jun 23, 2008 13:20:53 PM

Title Claims

Sorry to disappoint, but title insurance claims are not so low. Read the earnings (lack thereof) announcements of the title underwriters. They are all adding hundreds of millions of dollars to the claims reserves. They’re not doing that because they want to. They're doing it because they have claims to pay.

Peter A. of VA @ Jun 22, 2008 23:10:20 PM

Sorry Jane of CA

Title Insurance also covers many things that a search (current owner or full) will not reveal. I agree that while sitting at the settlement table you may wish that you had that money to spend on something else, but how will you feel when the heir of an owner two deeds back comes knocking on the door to inform you that his mother's signature was a forgery and you do not have the right to own the property? While the additional title premium you paid may have felt tight at the time, it bought you coverage in the amount of the purchase price of the property, NOT just the equity you had at closing. Your lender will be protected, but you won't.

You may or may not have access to the title search results, however, title insurance covers MUCH more than just what shows up in the search. Title Insurance is a necessary way to protect what will probably be the biggest investment of your life

Leslie of PA @ Jun 20, 2008 12:42:53 PM

jane of CA

You should read the article again. There are rip-offs a plenty in a purchase/sale transaction, but the title agent is way at the bottom of that pile. Look at the guys making the big money and you will find your rip-offs.

Sandra of PA @ Jun 19, 2008 16:32:30 PM

Opting out does not make sense

In response to Jane of CA, the buyer does not have access to the results. Because of the massive amount of purchase and refinances in the last several years, the searches that have not been necessarily the highest of quality. The lenders wanted quick turn-around and did not want full searches. They only wanted current owner searches which means that there could be unreleased mortgages that have superior rights over the current mortgage holder. if the prior unreleased mortgage holder was not paid off or an open line of credit not closed, they could foreclose which leaves the current owner without recourse because the lender would be the only one covered under the lender policy.

Also, the reason that there are so little claims paid out is because the local title agent usually pays for it out of their pocket instead of making a claim to the underwriter.

Andy Maloney of TN @ Jun 19, 2008 16:30:44 PM

opting out makes sense

jane of CA talks about the fact that an upfront investigation of the title has taken place for the lender and the "buyer hasaccess to the results." leading her to conclude the owner doesn't need the coverage. Unfortunately, she overlooks the fact that although the owner may have access, he has no insurance. If there is an off record claim such as a forgery or fraud or identity theft, only the lender would have recourse under these facts. The owner would be left to his own legal fees and battles.

Isidore Teitelbaum of NJ @ Jun 19, 2008 16:26:27 PM

opting out is crazy

You don't buy fire insurance because you expect a fire. You buy fire insurance in case of a fire. The same thing is true with title insurance. You HOPE you will never need it, but with all the problems with titles, including identity theft, theft of funds, and those all too common mistakes in recording (and not recording1) complex real estate documents, I sleep better at night knowing I don't have to worry.

Jeanine of FL @ Jun 19, 2008 16:05:05 PM