You buy car insurance in case of an accident. Health insurance covers you if you get sick. Homeowners insurance helps you rebuild after a fire.
But what do you get when you buy title insurance?
Americans spend more than $16 billion annually for title insurance when buying, selling or refinancing their homes. But few people question the expense, even though they're probably paying too much, say consumer advocates and government regulators.
What's more, title insurers have been fined repeatedly for illegally giving concert tickets, trips and even cash kickbacks to real estate agencies, lenders and builders. Consumers typically go with a recommendation from one of those sources, experts say, and may not even realize that they have a choice.
"Consumers of title insurance often tend not to get the best deal because they're not the ones who end up selecting which title insurance policy they will end up buying," California Insurance Commissioner Steve Poizner said in an interview.
"Unfortunately, what's happened in this industry is there's been a lot of illegal kickbacks and incentives that have been paid by the title industry to others to steer business in a particular direction," Poizner said.
Title insurance is part of virtually every real estate transaction. It covers claims and legal fees for home buyers and lenders if problems arise -- even years later -- over ownership of a property's title.
Defects in title include errors or omissions in deeds, mistakes in examining records, forgery, liens for unpaid taxes or contractor's bills, conflicting wills related to the home and missing heirs who suddenly appear and claim to own the property.
Typically there are two title policies for each property: one to protect the home buyer; the other to protect the mortgage lender.
In California, coverage that protects the buyer would probably cost about $1,200 to nearly $2,000 for a $500,000 home. In Southern California, the policy is customarily paid for by the seller, but practices vary by region. In the San Francisco Bay Area, for example, the buyer usually pays.
In most places, the buyer must pay for the policy that protects the lender. For a house with a $400,000 mortgage, the policy would usually cost $500 to $600.
Such policies can offer peace of mind even though there's little chance a homeowner will ever encounter a title-related problem. While auto and homeowner insurers return about 70% of their premiums to customers in claims, title insurers pay out just 5%.
Title insurers say that's not a fair comparison, since a portion of the premium is devoted to preventing problems. First American Corp., the Santa Ana-based company that is the nation's leading title insurer, says that for 30% of applications it does "curative" work, including fixing errors, before issuing a policy.
Such insurers market their product not to the party paying for it, but to real estate agents, lenders and builders because they have the most influence over what title company is used. These marketing efforts sometimes take the form of cash rewards and gifts, although federal and state laws forbid giving anything of value in exchange for referrals in a real estate transaction.
A 2007 report by the U.S. Government Accountability Office found 58 federal and state investigations into illegal payments by the title industry, resulting in more than $100 million in fines and penalties during the previous four years.
In the last three years, California's four largest title insurers have been ordered to pay about $49 million in penalties and refunds for illegally giving cash and gifts to reward real estate agencies, lenders and builders who brought in title customers, according to Department of Insurance records.
In 2005, state investigators found that First American had given tickets to sporting events, the Teen Choice Awards and concerts featuring Gwen Stefani, U2, Elton John, Velvet Revolver, the Eagles and Paul McCartney.
The company spent thousands of dollars more on food and beverages for real estate agents' events and paid for chartered fishing trips, riverboat dinner cruises and trips to the Del Mar racetrack.
First American and its chief competitors -- Fidelity National Financial Inc., LandAmerica Financial Group Inc. and Stewart Title Guaranty Co. -- have also been sanctioned for funneling millions of dollars to realty agencies, builders and lenders through sham "reinsurance" arrangements.
The real estate intermediaries were purportedly being paid to share the title insurance risk, but state investigators found they never had to pay out a single penny in claims.
In agreeing to pay fines and give refunds to consumers, the four title insurers neither admitted nor denied wrongdoing.
Industry leaders say they do not condone unlawful practices.
"They are the exception in the title business, but when they do occur they should be addressed by regulators," said Kurt Pfotenhauer, chief executive of the American Land Title Assn.