As part of the nationwide shock and concern over failures in the foreclosure process, last weekend’s New York Times contained an Article on the imporantance of Title Insurance. There was also a related blog post on Ron Lieber’s blog, asking readers to share their experiences. There were dozens of comments, and I joined in. Since you might have missed it, here’s my response on the importance of title insurance:
Unfortunately, the title insurance industry has failed to educate the consumer on the importance of the title insurance product so it is understandable that there is much confusion as to coverage and frustration over the cost. The role of the title insurer and its agents is to eliminate the risk of the hazard of litigation. In other words, all the due diligence work is done up front before the policy is issued so that a claim will hopefully never be made in the future – this is what the consumer is paying for. And just because a homeowner has a title insurance policy doesn’t mean that she is free from the aggravation and disruption that a claim will bring. The premium is paid one time but the policy has no end date. The policy is good as long as the policy holder retains title to the property. A casualty insurer sends its policy holder a renewal notice each and every year. A title insurer issues an Owner’s Policy of Title Insurance once, for one fee, and has no idea when that policy will expire.
The point is not to feel that you’ve gotten your monies worth if a claim is filed and paid, the point is that you got your monies worth when there is never a need to file a claim.
As far as shopping. It is quite simple. All real estate is local so use a local, licensed, independent title insurance agent. Keep your transaction free of potential conflict and hire a real estate agent, mortgage lender, and title insurance provider that are not affiliated. If applying for a mortgage through a national lender and not using a local representative, do not allow the lender to choose your title insurance provider. You will most likely end-up with a Notary Public at closing who has no knowledge of the title insurance profession as well as local ordinances.
A real estate transaction is one of the most important financial agreements a consumer will ever make in a life-time; unfortunately, we as a society have diminished its importance by eliminating the checks and balances.
What do you think?