Unlike other types of insurance, a title insurance policy is usually purchased from a title insurance company with one premium payment, generally made at the time a piece of real estate is purchased. For a lender’s title insurance policy, the coverage lasts the length of the loan, even if it is sold to another financial institution. An owner’s title insurance policy covers the property for as long as it is owned by the person who purchased the insurance or his or her heirs. The cost of title insurance varies between states since they can write their own laws and regulations concerning what a typical title insurance policy covers. In most cases, the policy will cost a few dollars for each $1,000 of the property’s value, up to about 1% of the cost of the home. In some states, it is possible for the seller to pay the premium for an owner’s title insurance policy, so in a weak housing market, this cost can be used as a bargaining chip.
Depending on where the real estate is located, different things may be included, or not included, in the premium charge. For example, in some areas, a title search is part of the premium paid to the title insurance company, while in other states that task is handled by a lawyer or outside company. Consumers should look at all the costs related to the title when assessing the cost of title insurance. Any costs for title insurance premiums or title search fees should be spelled out in the Good Faith Estimate provided by the mortgage lender, or any other title insurance policy documentation.
In general, the more that is included in a title insurance policy, the higher the premium, while more limited policies will be cheaper. The purchase price of the real estate being covered will also raise the limit of the policy, and therefore its overall cost.
