How To Save 90% on Title Insurance

The Title Insurance Policy

The title insurance policy, unlike most insurance policies, covers past events. For example, the daughter of a previous owner claims that her father conveyed a deed while not mentally competent, the current ownership may be in jeopardy. The title insurance company will defend the claim and pay for any damages (usually the value of the property). The policy does not cover claims based on events that occur after the policy is issued. Furthermore, the policy usually contains numerous exceptions, such as claims based on information undisclosed to the title company. Thus, if you are aware of any potential problems that might lead to a claim, your failure to disclose this information to the title company will lead to a denial of a claim based on those events.

Ask for a "Re-issue" Rate

A title insurance coverage starts from ancient history and ends from the date you transferred title. Since most transfers are insured by a title company, the longer you own the property, the more the policy costs. Consider this: if you buy a property and the transaction is covered by title insurance, then you sell it six months later, what are the chances that something went wrong in the last six months? The answer is that the chances are slim to none, so the risk of a claim against the title are slim to none. For this reason, title companies offer a "re-issue" rate. The re-issue rate is a discounted price (usually about 40%) on the title insurance policy if another policy from a title company was issued on the same property within the last few years. The rate is lower because any claims that arise from events before the previous owner are covered by the previous policy. Thus the new policy really deals with the risk of claims from events that occurred while you owned it.

Try a "Hold-Open" Policy

If you are buying a property with the intent of re-selling it within a year, ask the title insurance company for a "hold-open" policy. For a small fee (usually an additional 10% on the policy), the title company will hold a title commitment open for a year or more. Rather than issue a policy based on the first transfer (from the seller to you), they will issue a policy on the second transfer (from you to the next buyer). Since the seller usually pays for title insurance, you can pay the additional 10% when you buy, saving 90% on title insurance when you sell.