Though using an online calculator is the most convenient way to estimate the cost of title insurance, knowing exactly what factors affect title insurance premiums can help homebuyers save a lot of money.
Calculating the Cost of Title Insurance Premium
Regulated by state law in 41 out of 50 states, the cost of title insurance depends on many different factors, including property type and location, purchase price, home loan amount, amount of coverage, transaction type and title service fees. According to the Federal Reserve, the cost of a title policy can range across the country from $175 to more than $2,000.
For instance, title insurance premium in the state of Florida is established according to the Rule 627.7825, as follows:
- 5.75‰ for policies up to $100,000;
- an additional 5‰ for policies in excess of $100,000, up to $1 million;
- an additional 2.5‰ for policies over $1 million, up to $5 million;
- an additional 2.25‰ over $5 million, up to $10 million;
- an additional 2‰ over $10 million.
According to this rule, a home purchased for $200,000 will carry a cost of $1,075 for title insurance, assuming that the policy covers the full value of the property. Since title insurance rules and rates promulgated by each state don’t include title service fees, home buyers often end up paying more, based on the fees of each company.
Charges for settling a loan can also be included in the insurance premium. To find out the exact amount you need to pay for a particular title policy, you can contact the company you intend to buy insurance from and ask for its specific rate calculation formula.
The Cost of Title Search
Though state regulations and housing prices are substantially associated with insurance premiums, two other significant variations that impact the cost of title insurance are the title search process and title report.
In most cases, the cost of title search and report depends on the complexity of title examination procedures. The process of determining the chain of ownership of a piece of property can be very laborious, considering that every single transaction, proceeding, and gap in dates and certification numbers relating to that property must be verified. If the fees associated with the title search process and title report aren’t included in the premium, you’ll have to cover them separately.
Higher Premium for Extended Coverage
If you intend to get extended coverage to protect your investment against off-record problems, such as incorrect home appraisals and zoning bylaw violations, and post-policy clouds, including value increase and adverse possession, be prepared to pay a higher premium (state regulated).
Depending on the specific endorsements added to the policy, extended owner’s coverage can cost you an additional 15 to 50 percent above the standard policy. However, it’s important to keep in mind that title insurance premium is a one-time fee that offers coverage for so long as you or your heirs have an interest in that piece of property. To find out the exact cost of a policy with an extended level of coverage, you can request a free, no-obligation quote.
Qualifying for a Reissue Rate
A reissue rate is actually a discount of the stated title premium a homeowner can get in case of a previously issued policy. This means that you’ll receive the same valuable coverage at a lower cost. Your eligibility for a reissue rate also depends on a whether you meet or not a set of state-dependent requirements.
If you qualify for a reissue rate, the discount you’ll get is either a fixed percentage, calculated based on the prior policy, or a variable percentage, established according to rules and regulations of each state. If we consider the previous example, the reissues rate in Florida is determined based on certain coverage limits, such as:
- 3.3‰ for the first $100,000;
- an additional 3‰, if coverage exceeds $100,000, up to $1 million;
- an additional 2‰, if coverage exceeds $1 million, up to $10 million;
- an additional 1.5‰ over 10 million coverage.
If you need, for example, a title policy to cover a $250,000 purchase and the amount of the existing owner’s policy is $200,000, the reissue rate applied to the face amount of the $200,000 policy is $630. By subtracting the reissue rate ($630) from the full premium of the existing policy ($1,075), you get $445. If you deduct $445 from the full premium of the new policy ($1,325), you find out the amount you need to pay, which is $880, to get coverage for the full purchase price of your home.
To learn more about how to determine the cost of title insurance or to find out if your real estate transaction qualifies for a reissue rate, call our team of experienced title agents today at (904).992.1162 or submit a title quote request online.