HOME BUYERS: MAKE SECURING HOMEOWNERS INSURANCE A TOP PRIORITY
At long last, your loan package has been approved, your closing date is just days away, everything you own has been packed, and all that remains is a quick call to line up a homeowners policy. That's when the bad dream can begin.
Your agent might inform you that your new home is uninsurable because of a history of insurance claims filed by the previous owner. Despite home inspections and required real estate disclosures, this could happen to you.
Securing homeowners insurance used to be one of the last tasks a buyer undertook before closing. In reality, it should be one of the first.
Before issuing a policy, insurers always check a property's claims history. Water damage claims are red flags, but homeowners can also set off alarms simply by inquiring about coverage without filing a claim.
Most insurance companies research past claims through a shared database called CLUE, which stands for Comprehensive Loss Underwriting Exchange. When you apply for homeowners insurance, the insurer will request a CLUE report to see whether you or the seller has filed any claims during the past five years.
Regrettably, you generally cannot order a CLUE report if you are not the homeowner. However, you can ask the seller to order a copy of the report as a contingency to your offer; for more on buying and insurance steps, see Home Buying and Insurance Considerations.
If you are ever denied insurance because of past claims, you can request a free copy of your CLUE report and ask that your account of events be included if you dispute the record. If you are simply curious about a home's claims history, you can also order a copy from the company that manages the CLUE database.
It pays to spend time educating yourself about homeowners insurance when seeking affordable coverage; to read more about what policies cover and how they differ, see Understanding Homeowners Insurance.
Ways to reduce your premium
- Learn the rules regarding homeowners insurance renewals in your state. Regulators in some states control when an insurer can refuse to renew coverage.
- Pay for small losses yourself. Insurers notice customers who submit frequent small claims.
- Increase your deductible and consolidate insurers. Raising your deductible can lower your premium, and many companies offer discounts for insuring both your car and home with them.
- Examine your credit record. Insurers often use credit-based information as one factor when deciding whether to issue a policy.
If you need help comparing options or getting a new policy, it's wise to talk to an agent who can review available coverage and requirements.
Frequently Asked Questions
What is a CLUE report and why does it matter?
A CLUE report lists insurance claims filed on a property or by a person and helps insurers assess risk when deciding whether to offer or price a policy.
Can a buyer force a seller to order a CLUE report?
Yes, you can include a request for the seller to provide a CLUE report as a contingency in your purchase offer, though the seller must agree.
What can I do if an insurer denies coverage because of past claims?
You can obtain a free copy of the CLUE report, dispute inaccuracies, and ask the insurer to include your explanation in the record.
How do small claims affect my ability to get insurance?
Frequent small claims can raise red flags for insurers and may lead to higher premiums or nonrenewal, so paying minor losses out of pocket can help maintain insurability.