Title Insurance

Title Insurance

Many people don’t know what title insurance is, much less think about the cost (For a primer on title insurance see this page). For many people, the choice of a title company is made upon recommendation and not price. However, title insurance represents a fair chunk of the third party closing costs associated with purchasing a home. How much? Let’s take a look:

What Does it Really Cost?

Suppose you are purchasing a home in South Florida with a conventional mortgage and the insured value of your home is $1 million. You probably already know some of the associated costs: 20% down would be $200,000, every point will be $10,000 and you probably already know how much your loan originator will charge you. What about title insurance though?

In the state of Florida, title insurance rates are set by the state. The rate schedule varies based on the insured amount of the property and has brackets similar to the income tax. The current rate schedule in Florida is:

Insured Amount Premium Rate
From $0-$100,000* $5.75 per $1,000 insured**
Over $100,000-$1,000,000 $5.00 per $1,000 insured
Over $1,000,000-$5,000,000 $2.50 per $1,000 insured
Over $5,000,000-$10,000,000 $2.25 per $1,000 insured
Over $10,000,000 $2.00 per $1,000 insured

*Minimum premium is $100

**Fractional thousands are calculated as full thousands

Knowing the rate schedule we can know see how much your title insurance policy would cost for your $1,000,000 home

Insured Amount Premium Rate
$0-$100,000 $575.00 (First $100,000 divided by 1,000 = 100. Multiply by $5.75)
$100,000-$1,000,000 $4,500 (Remaining $900,000 divided by 1,000 = 900. Multiply by $5.00)
Total Cost of Premiums $5,075

Of course, as with many things in life, and especially with financial products, it’s never that simple. Title insurance is actually made up of two different policies: a Lender’s policy and an Owner’s policy. The lender’s policy is just like it sounds, it protects the lender’s investment, that is your mortgage. Should something go awry with the title of the home you just purchased on borrowed money, the lender wants to be assured that they can recover their capital. The Owner’s policy on the other hand, protects you. The catch is that while it’s called the Lender’s policy, you’re the one who is expected to pay for it and almost every lender will require you to purchase a policy in order to lend to you! The extra cost of issuing both an Owner’s and Lender’s policy is $25. This brings your premiums to $5,100.

In addition, there is an enhanced version of the title insurance that almost every lender will also require you to add on to the policy. This enhancement protects against other possible title issues including restriction violations, mineral rights, encroachments into easements and more. In Florida this enhancement costs 10% of your premiums. That’s another $510.

Finally, there is the environmental liens protection which guards against the title company missing a publicly filed environmental lien in the title search. This costs another $25. So, in total your title insurance premium will be $5,635. That’s a significant cost! (There are other possible endorsements, some of which are required if you are purchasing say a condo or waterfront property, but for simplicity’s sake we’ll stick with these.)

How We Save You Money!

Now you may be wondering, with title insurance rates being set by the state of Florida, how can we offer a discount on title insurance? Well there are a couple of ways. First of all, in Florida there is something called the re-issue rate. If the current owner of the property took out a title insurance policy less than 3 years ago and can provide documentation of that policy being taken out, then you pay a reduced rate on the new title insurance policy for the original amount insured.

To return to our example, say that the house you are buying for $1,000,000 was bought by the current owner for $800,000 2 years ago. That owner took out a new policy and has documentation to prove it. Now when you take out your policy you’re entitled to a reduced rate for that $800,000 of coverage. The reduced rate schedule is below:

Insured Amount Premium Rate
$0-$100,000 $3.30 per $1,000 insured
Over $100,000-$1,000,000 $3.00 per $1,000 insured
Over $1,000,000-$10,000,000 $2.00 per $1,000 insured
Over $10,000,000 $1.50 per $1,000 insured

This reduced rate means that instead of spending $5,635 you will spend $3,825.50 since the first $800,000 is priced at the reduced rates and only the second $200,000 is priced at full rates. This is a savings of $1,809.5 or 32%! Many people don’t know about this potential savings so it is always worth finding out if a policy has been issued within the last three years.

The second way we are able to offer a discount is through what is known as the Butler rebate. In Florida, only 30% of your title insurance premium is sent to the underwriter. The other 70% is held by the title agent to compensate them for the work done. It used to be that there was a ban on title agents rebating any portion of the insurance premium to their client, but a case in 2000 changed that. The Butler rebate allows title agents to refund a portion of the client’s premiums saving the client money. Using our case above a 10% rebate would provide a savings of $382.55 for the re-issue policy and a rebate of $563.50 for the full price original policy. That’s money back into your pocket!

Most title agents don’t advertise the Butler rebate, they want to keep as much money as they can, not us though! We are committed to providing the best deals possible on title insurance and we do that by providing rebates to our customers! Our commitment to creating value for our clients makes us the leader in discount title insurance.

Have a transaction that you need title insurance for? Then request a full quote from us detailing title insurance, escrow and closings costs. You’ll be happy you went with us!