Certainly the current real estate market has created opportunities for home buyers, whether looking for a just-built home or an older home. Most home buyers give little thought to the cost of homeowner’s insurance or how those costs are determined. While insurers look at a number of factors to determine premiums, here are two you should consider:
Claim history. Insurance companies don’t like to lose money and if you are one of those customers who is quick to file a claim, you may find yourself facing much higher premiums or declined coverage altogether. Insurance companies have always had the right to refuse to provide insurance to people who file too many claims. Your best defense is to raise your deductibles and pay for smaller claims out of your own pocket. I typically recommend a minimum deductible of $500 but often recommend $1,000 or more. Raising your deductible can easily reduce your premiums 15% to 25% allowing you to affordably self-insure. Have your homeowner’s agent run several estimates for higher deductibles to determine which is best for you.
Property history. In addition to your personal claim history, insurance companies also often review the claims history of the property itself. This has trapped many a new homebuyer who was unaware that the property they now own has had significant problems in the past. Often the seller was also unaware of the history of the property. Areas of greatest concern include toxic mold, water damage and structural damage. Lawsuits abound in these areas and insurance companies are anxious to avoid properties with a history of these types of claims. Here, your best defense is to require a C.L.U.E. report before you purchase your new home. The Comprehensive Loss Underwriting Exchange, known by the acronym CLUE, is a central reporting service that insurers use to review the claim history of both individuals and properties. The cost of the report is $19.50 and includes dates of claims, the insurance companies involved, the amount paid on prior claims and cause of the loss. The CLUE report can only be ordered by the current homeowner so as a purchaser, you should request it as part of your offer agreement.
As a homeowner, you may want to order a CLUE report if you are not familiar with your home’s history. To avoid future claims, take preventive steps and repair any house problems early on. Mend any water leaks quickly. Service your air conditioning and heating systems annually. Make sure you have good air circulation throughout your home. To order your CLUE report, go to www.choicetrust.com or call 866 527-2600.
One final tip. Insurers have determined that people with poor credit are more likely to file claims and they now check an applicant’s credit rating as part of their screening process. Poor credit can get you a rejection notice or cause increased premiums. For a free credit report, go to www.annualcreditreport.com.
The bottom line is that it is possible for you to have a squeaky clean record yourself, but still get saddled with high premiums because you’ve chosen a home that has a checkered past. To avoid this, you will need to do your homework.