You go out and buy homeowner’s insurance, thinking the only factors affecting your premiums are those that pertain to you. You probably figure the agent will check your credit history and look at various aspects of the home to determine your premium.Get today’s insurance rates.
This is all true, but it’s not all-inclusive. If you buy a pre-existing home, the behaviors of the previous owners pertaining to their insurance claims could have a major effect on you.
What do Previous Owners Have to do With Your Premiums?
When an insurance company assesses the risk you and the home you want to insure pose, they look at the history of the home. Insurers have access to the Comprehensive Loss Underwriting Exchange to get this information. This database includes information regarding the last seven years at the property, regardless of the fact that you did not own it at the time.
If an insurer sees a large number of claims during that time regarding the property in question, you could be without insurance. Insurers look at properties with many claims over the last few years as risky. The insurance company may wonder what is wrong with the home and why there are so many claims for it.
One of the largest red flags is any type of water damage. This is one of the costliest claims for an insurance company. If there is a history of more than one water damage claim, it may not bode well for you as the new owner.
Non-Claims Can Hurt Your Chances Too
Perhaps even more alarming is the fact that a non-claim can even hurt your chances of getting insured. Let’s say the previous owners called their insurance agent to ask his opinion about a potential claim. The owners did not file a claim yet; they just wanted to know what the agent thought. Well that simple conversation started the claim process at the insurance company, probably unbeknownst to the previous owner. If the owner then decided to not file a claim, but pay out of his own pocket, the claim was closed. Again, the owner never realized there was a claim, but it is now a mark against the property.
If the owner had any real claims after this, it could leave you in the lurches when you are trying to get insurance on the home. Luckily, you have the option to do some research yourself before buying the home.
Get a CLUE Report
You can gain access to the CLUE report for the property you intend to purchase before you close on it. However, you’ll have to get it from the seller. Until you own the property, you are not entitled to a copy of the report. But, you can request that the seller provide it to you as a condition of your bid.Shop and compare insurance quotes.
The report will not provide you with any personal information about the seller. It sticks to the facts regarding any past homeowners insurance claims, which is really what you need. You can see the claims that occurred as well as how long ago they occurred. If they were within the past 5 years, they may be of concern to you. If they were more than 5 years ago, you may be able to get insurance and not have to worry about those claims.
Making a Decision
We highly recommend checking out the CLUE report before you decide whether or not to buy a home. Not only will it help you determine the potential cost of homeowners insurance or if you will even be able to secure insurance, it will also help you decide if it’s a good investment.
You may want to think twice about buying a home that has had multiple claims. What were the claims for? Was it something the homeowner could have prevented? Was it weather related? Was there a string of robberies/thefts in the area? These are questions you want to get the answers to before deciding how to proceed.
The fact that the previous owners can have an impact on your homeowners insurance premium is a big deal. You’ll need homeowners insurance as long as you live in the home. Chances are you want to start off with a clean slate and get the lowest premiums possible, especially after just buying a new home.Get the right insurance coverage.