How is Title Insurance Calculated? 

Title insurance is one of those things that no one ever really talks about — unless you are buying property. Somewhere through the process, your title company is going to ask you if you are interested in purchasing a title insurance policy. 

Most buyers have a ton of questions about title insurance. After all, it isn’t every day you find yourself faced with the decision to buy a policy to protect your ownership rights. For those who have to come up with hefty closing costs, an additional fee can sometimes feel like too much. 

How is title insurance calculated? Here is everything you need to know. 

What is Title Insurance? 

Title insurance is an insurance policy that protects owners and lenders from any financial loss they may encounter due to title defects. 

Your title company will work hard to ensure you have a clear title before closing. Unfortunately, sometimes title issues do not appear until after it has changed owners. What may have been the previous owner’s issue now becomes yours. 

A few examples of title defects include: 

  • Missing heirs
  • Erroneously recorded deed
  • Boundary disputes
  • Liens 
  • Judgments
  • Forged or fraudulent deeds
  • Easements
  • Lawsuits
  • Bankruptcies

With title insurance, you don’t have to worry about any threats to your property rights as you are financially protected by the policy. The same goes for the lender. 

Title insurance is not necessarily a requirement, but it is highly recommended to protect your rights to your new property. Most lenders will require you to purchase a policy as a condition of the loan since it helps them to mitigate risk. 

Calculating the Cost of Title Insurance in Michigan

The cost of your title insurance is directly related to the type of policy. An owner’s policy value is based on the sale price of the property whereas a lender’s policy depends on the amount of the loan. The cost is calculated at a rate per $1,000 which will typically work out to being .05% to 1.0% of the sale price or loan amount. 

There are a few additional fees you can expect to pay that are associated with the title insurance policies, though not the insurance itself. These may include title search fees, title settlement fees, document prep fees, notary fees, land survey fees, and more. Your title company sets these fees and will be able to give you specific amounts. 

It is important to note that every state varies in how they handle title insurance. The above only applies to calculating the cost for properties in Michigan. 

How Often Do You Have to Pay for Title Insurance? 

Many people assume that because title insurance is, well, insurance, it must have a regular premium to be paid like other types, such as auto, medical, and life. However, that is not the case at all. 

The beauty of title insurance is that you only make one premium payment to purchase the policy —- and you are covered. That’s it. 

Paying for an owner’s policy at closing will keep you protected for as long as you or your heirs have an interest in the property. In other words, you will pay for your premium at closing today and if a claim is filed against your property years down the road, you have coverage. 

A lender’s policy is a bit different. While it is paid for at closing, too, it is attached to the loan. That means the lender is protected by the policy for the outstanding amount of your mortgage. And once it is satisfied, the title policy is no longer effective. But it does not require you to make more than one initial payment to reap the benefit. 

Where Do You Buy Title Insurance – And Who Pays For It? 

The title company handling your real estate transaction will perform the title search and offer you the title insurance policy. They can answer any questions you have about the policy and the coverage that it provides. 

So, who pays for title insurance in Michigan? While there is no legal mandate that requires one party or the other to pay for the policy, it is common for the seller to purchase the owner’s title insurance policy at closing — and for the buyer to purchase the lender’s policy. This can always be negotiated. 

Working with a dedicated team of title professionals, you can feel confident that all of your title insurance questions will be answered so that you feel confident moving forward. 

Blue Pointe Title Agency is a Michigan title insurance agency that successfully drives real estate transactions of all types from contract to closing. Serving the entire state of Michigan since 2018, Blue Pointe is committed to providing outstanding customer service and a smooth closing process.