How to Start a Title Insurance Company

The title industry is very lucrative.

The title insurance industry is extremely profitable. Starting your own company will take some doing if you thinking about building one from the ground up. Most title companies today are owned by attorneys, general contractors, mortgage companies or others that have years of industry experience. It can be done; however, you must follow some legal steps and certification requirements in order to start a company from scratch.

Instructions

1. Know the business. The title industry is considerably complicated, especially for those without basic knowledge about real estate financing, residential and commercial construction, public record searches and escrows. It is highly recommended to either work for a title company for three to five years or thoroughly educate yourself on the ins and outs of the industry before opening your own company (See Resources).

2. Have a strong business plan. Depending on your state's guidelines, you may be required to produce a detailed business plan including financials, references, individual resumes of your staff members and two to ten years worth of projections. Contact an experienced CPA to help you write a solid plan.

3. Incorporate. Before going through the application and registration process, form a corporation such as a partnership or LLC. Doing so allows you to separate yourself from the liabilities of your firm and to obtain credit, make purchases and other financial decisions in the name of your company (See Resources). It will also make it easier to become licensed. Most states prefer title companies to be incorporated.

4. Get bonded. You'll need to purchase a surety bond. A surety bond ensures your company fulfills its obligations, giving your customers the opportunity to obtain bond funds to recover their losses if you fail them. The amount of a surety bond usually represent 10 to 25 percent of your net worth and will cost you around $150 to $1,000.

5. Find an office. Before you apply, you must have a verifiable business address. Each branch location must also have its own location separate from your home office. Title companies are most successful in quiet, professional office complexes or stand-alone buildings near real estate offices, banks and mortgage companies.

6. Apply for a state license. To become licensed, you must contact your state agency that regulates insurance companies. Your state's government website should be able to point you in the right direction, or will have a contact number for you to reach a representative to direct you to the appropriate department. Complete the application thoroughly. You must include your personal information as well as that of your business such as your Federal Identification Number. You must also reveal the address of your home office and each branch. In most states, all managers, directors or owners are required to be fingerprinted and have background and credit checks done on them. Application fees fall into the $50 to $100 range.

7. Get insured. To become approved to sell a title insurer's products, you must purchase an Errors & Omissions insurance policy (E & O) and Fidelity bond. Most insurers require an E & O policy to be $250,000 or more. Fidelity bond requirements are usually in the $50,000 range, depending on the title insurer's guidelines (See Resources).

8. Become an official agent. In order to issue title policies, an underwriter from a major insurance provider must appoint you as an agent. Contact a title insurance company and complete an Insurer's Appointment Application Form. The company will issue an official letter naming you an agent for the company (See Resources). This process must be done for each company you plan to be an agent for.

9. Hire a staff. To be successful, you must hire closing agents, searchers, a compliance officer and office manger. Start small. Unless you have a large book of business, operating with a single searcher, closing agent and compliance officer is enough to run a small operation. Splitting duties between one or two people is also possible if you have enough industry experience.

Tips & Warnings

• Clear your credit and criminal history before applying. Criminal charges and negative credit histories need a thorough explanation, as they can result in the denial of a license. Hire an attorney. The title industry is highly regulated, and the application process needs to be completed thoroughly and exactly according to industry laws. Network effectively. Title companies depend on referrals from real estate agents, attorneys, home builders, mortgage lenders and insurance agents. Get to know as many people in these fields as possible. Join professional, real estate, home building and banking networking groups. Be fair with your rates. Research title rates of other companies in your area to get a good idea of what your market can bear.

• Hire a competent and honest compliance officer and experienced closing agents. Title fraud is taken very seriously by the federal government and often results in severe criminal punishments.

Resources

• Title Agent Training
• Create a LLC
• Security Union Title Insurance Company
• State Farm Insurance Company