What is the Difference between Title
Insurance and Property Insurance?
This is the part#5 of a series of
documents regarding Title Insurance.
Cost Structure and Frequency of Payments:
Title insurance theory is different from most other insurance where, for
example, rates and anticipated losses are based on actuarial studies and
premiums are pooled on the assumption that a certain number of claims
will be made.
The distinction is important: title insurance premiums are paid to
identify and eliminate potential risks and claims before they happen.
Medical, property and casualty insurance premiums, for example, are paid
to insure against an unpredictable future event, knowing that risks
exist and claims will occur.
Furthermore, title insurance involves a one-time premium with the same
rate for everybody, paid when you close the real estate transaction,
while property, casualty and medical insurance require renewal premiums
with different rates for different people based on their age, condition,
gender, habits, previous claims, etc.
What if a Claim Ever Arises?
Title Insurance Companies operate under the theory of risk elimination.
Title companies spend a high percentage of their operating income
each year collecting, maintaining and analyzing official records for
information that affects the title to real property.
The goal of title companies is to conduct such a thorough search and
evaluation of public records that no claims will ever arise. Of course,
this is impossible - we live in an imperfect world, where human error
and changing legal interpretations make 100 percent risk elimination
impossible. When claims arise, professional claims personnel, from Title
Company, are assigned to handle them according to the terms of the title
There is no co-pay or deductible for Title Insurance claims, where there
are always some kind of out-of-pocket (co-pay, deductible, etc.) for
property, casualty and medical insurance claims.