Get a C.L.U.E. About Homeowners Insurance

Homeowners insurance is an interesting beast, and not always a friendly one. Coverage is required by lenders, so if you’re taking out a loan, you’ll need insurance. The hope is that if damage occurs to, or within, the home––beyond the homeowners’ control––insurance will swoop in and cover the cost of the repairs. Some examples are flooding, high winds, fallen trees, hail, and fire.

Obtaining homeowner’s insurance is one of the many steps your Realtor will guide you through when purchasing a home. Traditionally, getting coverage has been more or less a quick and simple process, devoid of setbacks or unpleasant surprises. Recently, however, insurance companies have tightened their belts––and their underwriting––resulting in a not-so-straight forward step in the complex road to homeownership.

The tricky twist in this tale is that claims are reported by the insurance companies and become part of the public report, visible to future buyers, and more concerning, all insurance companies as part of the Comprehensive Loss Underwriting Exchange, or CLUE report, run by consumer reporting agency LexisNexis. This public report contains a running history of claims made by homeowners for each of the properties they have owned, storing the claim information for seven years.

This report is an important factor in eligibility for coverage and can be helpful for consumers who are considering purchasing a property, offering useful information about prior damage claims. On the flip side, however, insurance companies are now regularly turning to the CLUE report as an integral part of their underwriting processes, and it can potentially cause bumps in the road to buying. On the CLUE report, even two claims could be considered too many, and the potential insurer for your upcoming home purchase may see that as a red flag, making you look like a “claim happy” consumer.

Another little-known turn in the road is that non-payout claims (claims that were never carried through to fulfillment) are included in the CLUE report like little dings tarnishing what you thought was a shiny, spot-free record. The best way to avoid ill-advised red flags on your report is to be extra careful about what you file a claim about, and never call the 1-800 number for an insurance company to begin a claim. Once you give any personal information to a representative, it becomes part of your CLUE report as an initiated claim, whether or not any other actions are taken. Simply starting the claim process is enough to count on the report. Same goes for insurance apps: avoid starting a claim via the app. Opt instead to contact your agent directly to discuss options. This way, it is less likely to be auto-reported to the agency.

In addition to claims on record, there are other factors that can prevent a smooth process when trying to obtain homeowner’s insurance coverage. These include properties with significant defects, those in floodplains or high fire risk areas, those with excessive square footage, high price-point properties, older homes, and even those with flammable wood-shingle roofs. In addition, if the home will not be your primary residence, insurers may not want the risk of covering a property that is vacant too often.

If you find yourself in a coverage bind when the clock is ticking on your contract’s escrow period, it could potentially kill the deal. Thankfully, clearing your CLUE report is possible, but it can take weeks. The best way to avoid a stonewall when buying a property is to check with insurance providers as soon as you’re stepping in the market (i.e. early!) to make sure that there will be no CLUE-dipped setbacks. For more helpful information about the home buying process, I recommend this great resource.

The bottom line is to start the insurance process as early as possible to avoid setbacks during your contract period. In the meantime, be aware of how quickly claims––or even phone calls––can turn against you. Please reach out to your agent at Niche Homes for help finding trusted insurance agencies that have great track records with tricky coverage situations. Here are some other important things to remember as you’re starting to think about purchasing a home.