The Title Insurance Ripoff
Title insurance is a necessary evil, but many don’t realize how evil. You probably don’t realize that a full 70% of the title insurance premium you pay is kicked back to the settlement attorney handling the settlement.
In a commercial real estate settlement, this can be a very large figure. In a $5 million sale I handled recently, the buyer paid almost $14,000 in premiums.
While it doesn’t seem like a lot in the context of the sixe of the transaction, There’s no reason that you can’t negotiate with your settlement attorney, particularly in these tough times, to make sure you’re getting a fair break. The attorney deserves to make a living, but keep him or her honest, and let them know that you know about how profitable a transaction this can be for them and that you’d like to share in that.
Better yet, start a title company!
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Tags: title insurance
January 29th, 2009 at 2:52 pm
Thanks for a chance to help clear the air. Though I would agree that much of the title insurance delivery system is corrupt and should be changed, the product itself is great.
Any homeowner who has suffered a calamity of title, small or large, learns how very valuable the coverage is. So, like fire insurance, we hope you never have to use it, but if trouble comes to your door, you’ll be very happy that you have owner coverage.
The split between a title underwriter and the attorney or title agent who creates the policy is not a kickback. It’s payment for services rendered when the transaction has been processed in a traditional manner.
When a traditional title insurance policy is created, the producer [attorney or title agent] handles the search, examination and correction of issues prior to the issuance of the policy. They also normally also handle the closing. The purpose of examination is to eliminate potential claims and this is why they retain the lion’s share of the premium. The title company gets the rest of the premium to cover claims due to mistakes in examination or fraud or other sorts of errors that could not be found through competent examination. It’s payment for a safety net.