Underwriting is the concept of one entity or individual assessing the risk that an event will occur that triggers a financial payout from an insurance policy. Every type of insurance requires some form of underwriting.
Underwriting processes vary based on what kind of insurance is being bought, and a multitude of other factors. Since traditional insurance is forward-looking, or protecting against what could happen in the future, underwriting typically involves an assessment of how likely the issues will occur or how long the risk can be avoided.
For example, life insurance uses complex actuarial tables to determine how long an individual is likely to live given their current age, health status, family history, and other relevant criteria.
Title insurance is different from most other forms of insurance, in that title insurance insures against issues that were created in the past. Title insurance claims are those which affect the current title holder’s interest in a property from before the title holder acquired that property.
Instead of predicting the likelihood of an event occurring in the future, underwriting for title insurance asks the question: how likely is it that there are still unknown problems with the chain of ownership?
The first step in title insurance underwriting is the title search process. During that process, an agent of a title company endeavors to find as many issues with the title as possible.
Title underwriters look at what is uncovered during that process, what can be remedied, what can be left in place, and the likelihood that something was missed. Then title insurers determine how to best cover that risk, and deliver the title commitment, which is a promise to provide insurance
The information provided in Peak Title Professionals, does not, and is not intended to, constitute legal advice. All content is for general informational purposes only and is not intended to provide a complete description of the subject matter. Specific processes will vary based on applicable law. The title and closing process will be handled by a third-party attorney to the extent required by law. Product offerings vary by jurisdiction and are not available or solicited in any state where we are not licensed.
