When you fall in love with a potential new home, it's easy to be swayed by visions of the future and overlook the property's past. But before you make a commitment to buy, make sure you catch a C.L.U.E. – or you could be sorry.
A Comprehensive Loss Underwriting Exchange (C.L.U.E.) report, available from LexisNexis, is a seven-year history of a property's home insurance claims. It includes information such as:
You cannot directly request a C.L.U.E. report about someone else's property from LexisNexis. Only the current homeowner and entities such as insurance companies have the right to access the report.
However, LexisNexis also offers a C.L.U.E. Home Seller's Disclosure Report, showing the property's five-year history of losses, for the purpose of providing insurance claims information to potential homebuyers without revealing personal information in the report.
Why is this ancient history important to know? Because a home's breadcrumb trail of insurance claims can impact the home insurance rates you'll pay – or even indicate potential stumbling blocks that can make it difficult to obtain a home insurance policy in the first place.
Steve Gillard, C.L.U.E. product principal at LexisNexis, says, "Insurance companies typically look at five years of claims data when they are pricing insurance on a property for a new customer," he says.
"In order for a buyer to get a copy of the seller's C.L.U.E. report, the buyer needs to request it as part of their offer or agreement of sale," says Ron Clarke, CEO of Century 21 Alliance in Philadelphia. "Buyers can make their offer contingent on an acceptable C.L.U.E. report if they are concerned about prior damage."
The Home Seller's Disclosure Report "contains no sensitive personal identification information such as the Social Security number or date of birth of the home sellers," Gillard says.
The report costs $19.50 and must be requested by the seller.
Sellers are not obligated to provide a C.L.U.E. report. But Clarke says refusing to divulge the information creates a lack of trust between the seller and the buyer. And, he says, if you're buying a home, the C.L.U.E. report is "always valuable to learn about the property history."
"Some states have mandatory disclosure laws that require the seller to disclose any known defects in their property, but a C.L.U.E. report may reveal something that the seller has not disclosed," he says.
He adds that it's even more important to request a C.L.U.E. report on a bank-owned or lender-owned property, "since the bank will not be able to provide information on the property's past condition."
Once you have received the C.L.U.E. report, look for the types of claims that might raise your insurance rates.
Either a history of small claims or a single severe claim can impact insurance rates and the availability of insurance, says Chris Hackett, director of personal lines policy for the Property Casualty Insurers Association of America (PCI)
He says a pattern of some types of claims is a sign that you may end up paying higher insurance rates than you expected. Examples might include:
Clarke says buyers should be especially aware of the possibility of mold, because mold is not always visible. He suggests scheduling a home inspection after the C.L.U.E. report has been studied to follow up on potential problems.
"Buyers should be careful to look at items that have to do with the structure, health or condition of the home on the report," says Clarke.
Are there any claims that are so bad you might not be able to get home insurance at all?
Hackett says that home insurance companies vary widely in their appetite for risk. So, each company looks at a claim or pattern of claims in a slightly different light.
"If an inspection by the insurance company reveals that repairs were not made or that the condition of something such as the wiring in the home continues to have problems, that could result in a denial of insurance," says Hackett.
According to the Insurance Information Institute, homeowners who have been denied insurance coverage may need to make home improvements – such as upgrading the wiring or plumbing or heating system — in order to qualify for home insurance.
Hackett also urges you to ask sellers about any claims that were made but not covered by insurance.
"If a claim or two was closed without payment, that begs the question of whether it was covered or not under the previous insurance policy," says Hackett. "If it should have been covered but was not paid, buyers should find out why. Buyers should ask to see if that unpaid claim caused structural damage and if repairs were made. If so, they should ask for the contractor's report."
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