Loyalty Abstract

Frequently Asked Questions

What Is Title Insurance?

Title Insurance is sort of like homeowners insurance right?

Wrong.

Most people are familiar with one kind of insurance - casualty insurance - and assume that all insurance works the same way. It doesn't, and this misunderstanding causes confusion. We hope these questions will help clarify the difference between title insurance and casualty insurance.

Isn't all insurance basically the same?

To the extent that buying insurance protects you from the costs of unforeseen events and losses, yes, insurance is insurance. You buy homeowner's insurance in case a burglar breaks into your house, auto insurance to cover repairs after an accident, and life insurance to pay for your child's education if you are not there. These are all varieties of casualty insurance.

Land title insurance protects you, too, but it covers a different kind of loss, and its one- time premium pays for much more than simple risk protection. In short, not all insurance is the same.

What does title insurance cover?

Land title insurance protects you from events which may have happened in the past, not events that are likely to occur in the future, as does casualty coverage like automobile, fire, and flood insurance. Title insurance charges are based on a cost - per - $1000 of the property to protect the homeowner from claims which could jeopardize all or part of his property.

Some common losses? Records misplaced in courthouses, boundary disputes, unpaid taxes, and hidden defects in the title like missing heirs, forgery, fraud and other items which do not show up in the most exhaustive title search.

What about the premium?

One of the most common ways to arrive at insurance premiums is to forecast likely losses and add administrative expenses and profit. It is not unusual for 90% of the premium amount to be paid out for claims.

In the title insurance business, on the other hand, we may pay out only 8% to 15% of the fee for claims, and people often assume that the rest is profit. But only a small part of the one-time fee paid at settlement is for insurance; the remainder is the cost of conducting the many different searches required to show a clear title to the property.

What's the all - inclusive rate?

In Pennsylvania we have an all - inclusive rate for title insurance. It bundles together the insurance premium, the cost of executing the title search, and the settlement fee.

While the convenience of paying a one- time fee at settlement and incorporating the charges for the search with the insurance premium is obvious, some people look at the amount (approximately 1% of the sales price) and think the charge is steep from an industry which only experiences modest rates of losses compared to casualty insurers.

When you consider, however that the one-time fee covers:

  · the property for as long as the owner and his heirs own it,

  · all title searching and examination, even multiple searches, and

  · the costs of settlement

it becomes clear that land title insurance premiums buy you a good deal more than do casualty - type premiums. Although the land title insurance industry certainly offers insurance protection, comparing casualty and land title insurance rates is like comparing apples and oranges. The protection you get from land title insurance is unique.

Am I protected?

Even the most intensive search cannot avoid claims.

Suppose there are back taxes owed on a property. We go into the local courthouse, review the tax files, and find no evidence of these back taxes because a file is missing. We then insure the property and the tax claim pops up. We pay 100% of that claim.

Without title insurance, the owner must pay claims like these. Liens, unpaid taxes, and sewer and water are assessments are attached to the property - not to the person incurring the delinquency. If a previous owner had a judgment against his property, the new owner is responsible for payment. We insure against these circumstances.

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