To many home buyers, title insurance rates are a “black box” in that most don’t fully understand how title insurance rates are set.
In this post, we’ll try to shed some light on how title insurance rates are calculated, and how it differs between states.
Three primary methods to calculating title insurance rates
There are three different ways title insurance rates are calculated. This is often determined by state regulation (or lack thereof).
In this post, we’ll discuss the 1st method – File rates and which states use this method.
What is a filed rate?
Most states in the United States have what is called “Filed Rates” regarding title insurance, which basically means that their rates are not set by state law. They are either set by a rating bureau or each individual underwriter that operates in that state.
Keep in mind that your title insurance rate is not the same thing as your total closing costs. In fact, it is only one component of your real estate closing costs.
So where one underwriter may charge you less for title insurance itself, they may charge you more overall in the form of attorney, closing, or title search fees.
A Full list of Filed Rate states
Here is a list of filed rate states:
- Washington D.C.
- New Hampshire
- New Jersey
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
Most filed-rate states have selected either the “file-and-use” or “use-and-file” methods although some also use one called “prior-approval.”
The difference between the systems is in the items that get reviewed by the insurance department. For example, in prior-approval rate systems, the insurance department conducts an analysis of claims and other data supplied by the insurer to justify the filed rates.
Next, in file-and-use states a review is conducted by the insurance department, and the title agent is typically permitted to begin using a rate as soon as it is filed with the department, or after a specific number of days have passed once the filing is made.
Whereas, in use-and-file states, the title agent may begin using a rate BEFORE it files the rate with the insurance department.
Most agents have pretty competitive rates and work with multiple underwriters so they can pass through the best rate to you, their client. However, beyond the rates themselves, it is also important to consider the experience of the closing company, attorney, settlement agent, or escrow company you are working with to close on your property.