Title Insurance: DON’T Be Penny-Wise And Dollar Foolish! (Scenario)

By | November 30, 2016

title insurance on Long Island

Remember, Always Do An Apples To Apples Comparison When Purchasing Title Insurance!

In the past we have discussed that it’s critical when choosing your title insurance provider, that you make sure you are making the decision between firms on an apples to apples basis.

What exactly does that mean? After all aren’t all title insurance underwriters and title insurance companies basically all the same?

And, if that’s the case and one is less expensive than another, don’t you simply go with the cheaper one?

Lets face it, everyone likes to save some money when possible.

That said, the answer to the question of whether simply going with the least expensive provider is the right thing to do is yes, but!

If two televisions are basically the same but one is far less expensive because it’s not a ‘name’ brand,

If two tequilas are rated the same but one advertises and is therefore more expensive,

Or if two companies in some other industry are selling similar products with one priced lower,

Then of course saving money and going with the less expensive provider is an okay thing to do.

Title Insurance Scenario

But how about in the following scenario concerning the title insurance for a home purchase in Nassau County, New York with the following parameters:

$2,000,000 Purchase Price
$1,500,000 Mortgage

Company A: The total title insurance premium (Owners + Lenders policy) = $8,884

Company B: The total title insurance premium (Owners + Lenders policy) = $9,755

In this scenario, forgetting for a second about the other non-title insurance premium fees, which of these two provider choices should the consumer go with?

On the surface Company A is $871 or 9.8% less expensive than Company B so, one would think that using Company A is a no-brainer, right?

But looking under the hood and examining just one point of comparison between the two companies, the answer is not quite that simple!

Title Insurance Underwriter Ratings

Insurance, whether it’s life, health, home or title, is a critical thing to have and even better if for one reason or another a claim needs to be made.

But, at the end-of-the-day, insurance is only as good as the underwriters ability to pay the claim.

It is critical to know the rating given to a company under consideration and to realize that the higher the rating, and by extension the better the financial standing of the company, the more expensive the insurance premium will typically be.

So let’s go back to the example above.

Demotech, one of the rating agencies for title insurance underwriters, rated  Company A and Company B. What they determined offers some clarification for the disparity in price.

Company A: Rated S or Substantial

Sounds pretty good, right?

Company B: Rated A” or Unsurpassed

On the Demotech scale that goes A”, A’, A and then S, the difference in the cost of the two premiums now becomes very understandable!

For the consumer buying a $2,000,000 property, the decision that they have to make is whether paying $871 more in premium for a 3-step increase in the quality of the underwriter protecting their home is money well spent.

Remember that being pennywise and dollar foolish is a strategy, but is it the correct strategy? Only the buyer knows in their own unique situation but, for most, the answer is likely very obvious!

Comparing Apples To Apples When Choosing A Title Insurance Provider!

Beyond the rating of an underwriter, there are other aspects of a company that should definitely be in the decision-making mix too.

Please read ‘Title Insurance: Always Compare Apples To Apples! (Chart)‘ to learn more.

Michael Haltman is President of Hallmark Abstract Service in New York and a Director of Heroes To Heroes Foundation.

He can be reached at mhaltman@hallmarkabstractllc.com or at 516.741.4723.

 

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