Title insurance

Professional Actuarial Topics Property/Casualty
1

Title insurance protects a property buyer from financial loss due to defects in a title to a property.

If I were buying a property from another person, I would want insurance indemnifying me in case the seller did not have clear title, or had legal judgments affecting the property, etc.

I am in the process of buying a newly built home in a new housing development from a large nationwide home building company. Would you think there is the same need for me to buy title insurance?

And if the exposure to loss is reduced versus a more typical home purchase, do you think the title insurer reflects that in its rating? (I can guess the answer, but I’d be curious if someone has direct knowledge.)

2

Pretty sure title insurance is required to protect the lender. Are you buying it with all cash?

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3

John, yes. There is no lender.

4

When I sold my home they did a title search
Wouldn’t the insurance be redundent

There was a 20 year old lien, from a defunct bank, that was never cleared properly, after a refinance. That was fun. Had proof it was paid off, though not the final.payoff letter from them

5

From google:

Do I Need Title Insurance When Paying Cash For a Home? No , but it is a wise idea. When you pay cash for a home, you may think it’s permanently yours and no one can take it. However, if there’s a problem with the title it can threaten your ownership rights.

So short answer is no, you don’t need title insurance if you’re paying all cash. Whether there are rate differences based on specific properties would likely depend on the rating plan of your title insurer. Not sure what they usually segment on.

6

If the prior owner had an undetected lien, doesn’t it protect the new buyer from that headache?

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7

yeah, I mean it depends on the buyer’s risk appetite. In this case since it’s a new build the risk is less likely

8

Missed that

9

There could still be a title dispute about the land, though.

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10

before answering, what is the cost of the insurance? what is the usual bad event cost, and what does the worst bad event cost?

11

Answering a bit too late I am sure but At least here in Canada (Ontario) Title insurance protects against a defect in the title. As a purchaser this includes protection for undisclosed zoning or building code violations that as the owner you would be forced to remedy when discovered (title insurance can be extremely long tailed for this reason as technically the occurrence date is the purchase of the home as the cause of loss had to exist 1 second before the title was transferred to you). At least in Ontario, the rating was based solely on the classification of the residential building (ie condo vs freehold) and the value of the property (categorical range not rate /$). When you buy title insurance as part of a mortgage it is far less expensive but it is to protect the lender (not you) should you default on the loan (in Canada you can’t walk away) and they recoup the property from you and then discover a title defect. The cost is much lower because of the additional default requirement.