Important Facts About Title Insurance Regulations

If you are buying real estate, you are probably aware that the transaction involves a transfer of title, the document showing ownership of the home. What you may not be aware of is the need, especially in the U.S., for title insurance and the regulations surrounding said insurance.

What Is Title Insurance?

Title insurance effectively insures that your title is good. If there is some question as to the validity of the title and hence, the policyholder’s claim on the property, title insurance will kick in. The insurance company will cover monetary losses incurred by the dispute, as well as defend the policyholder in a lawsuit.

Why Does One Need Title Insurance?

Mortgage lenders will typically require that the purchaser of a property get title insurance to protect their collateral interest. In the U.S., the land records laws are not as well defined as in other countries, making challenges to property ownership much easier. Since the government does not regulate the transfer of title as closely as they can, there is a greater chance for disputing the transfer. Title insurance protects the property holder against this eventuality.

Title Insurance Regulations Facts

Regulations concerning title insurance may vary from state to state. The American Land Tile Association has boilerplate title insurance forms. However, some states like Texas and New York require forms especially sanctioned by the insurance commissioners of those states.

Homeowners can choose any carrier they want for title insurance. The bank or agent usually makes the choice, but by law, the choice is available to the homeowner. The law governing this is known as the Real Estate Settlement Procedures Act (RESPA).

The state in which you purchase a title insurance policy sets the premiums. In some states, it is unlawful for a title insurance company to charge premiums higher or lower than the standard set by the state government.

When buying title insurance, you want to be sure that you are not being overcharged. If you think you are being charged too much for title insurance, contact your state insurance board. Find out what the standard premiums are and how the premiums you are being offered compared. If there is a discrepancy, you should not only choose a new insurance company, but also alert the state board as to the practices of the title insurance company you are currently working with.