Sunday, November 11, 2007

query: an insurance agent explains policy I tell him I am not interested am I required to sign a waiver

In Pennsylvania, yes, you are required to sign a waiver. I'm not sure about other states.

Even if the state has no waiver requirement, in a purchase transaction, I would probably refuse to close without a signature on a waiver of some kind. A purchaser who forgoes an owner policy and only pays for a loan policy may be confused and think they have some kind of protection when they have none. The waiver makes the lack of protection abundantly clear and gives the title agent a record of disclosure.

Another angle on that topic is the practice of some title agents and attorneys who don't really explain an owner policy and simply toss a waiver on the nose of the buyer for signature at the closing table. You can't believe how many people I have met who thought they bought title insurance and later found that they had only purchase a loan policy.

When Realtors and lenders are too chicken to quote pricing for an owner policy and low ball an estimate using just a premium for loan policy they are NOT serving the best interests of the homebuyer.

Just for fun, go to our title premium calculator. Plug in your sale price and calculate the premium. Now plug in your loan amount. What's the difference between the premiums? Not much, is it? Pennsylvania is a simultaneous issue state. That means that we issue both the owner policy AND the loan policy at the same time and for the same premium which is based on the higher of the two - loan amount or sale price.

Let's say the sale price is $150,000 and the loan amount is $125,000.

The basic rate to issue both policies would be $1108.75. If the homebuyer did NOT want an owner policy, we would issue a loan policy at the premium for $125,000 which is $983.75. At that level the homebuyer gets NO protection at all. Their entire $150,000 is at risk.

Why would you skimp on the extra $125 and go completely naked on title protection? No informed person would and so we have to assume they have been misinformed and try our best to help them understand. That's why the waiver is so important if used properly and given with a strong explanation.

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