Check a Home's Insurance History

I'm shopping for a house and have heard that it can be difficult to get homeowners insurance if the house has a history of a lot of insurance claims. How can I avoid this kind of problem?

I'm shopping for a house and have heard that it can be difficult to get homeowners insurance if the house has a history of a lot of insurance claims. How can I avoid this kind of problem?

Insurance companies share information with each other about a person's and a house's claims history in a giant database called the Comprehensive Loss Underwriting Exchange (also known as CLUE). If an insurer sees that a house has a history of a lot of claims, you might have a tough time finding coverage -- even if the claims all occurred before you moved there.

Insurance companies are particularly concerned about water damage claims, which could eventually lead to very expensive mold problems. The CLUE report includes information about insurance claims made by the person or for the property within the past five years, including the date and type of loss and the amount paid and the insurance company.

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Before you buy a house, ask about previous claims, damages and repairs, and review the house's CLUE report. Only homeowners can order a report, so you or your real estate agent will need to ask the seller for a copy. The homeowner can order a Home Seller's Disclosure Report for $19.50 from ChoiceTrust.com (opens in new tab). This version of the CLUE report doesn't include personal information, such as the homeowner's name, social security number and date of birth, and only lists information for that address -- not any of the homeowner's previous addresses.

Then, search for a homeowners insurance policy as soon as possible after you sign the contract on the house -- rather than waiting until closer to closing -- so you'll have extra time to find coverage in case you get rejected by at first. Otherwise, you could end up scrambling around looking for coverage just before settlement because you'll generally need homeowners insurance before you can take out a mortgage.

Also, finding out a house's claims history ahead of time is a good idea because insurers in many states can cancel a policy within the first 60 days for any reason, and some do so after finding problems on the home's CLUE report.

And before you sell a house, get a copy of your CLUE report and make sure the information is accurate because prospective buyers may be checking you out. Sometimes questions about claims show up on CLUE reports as full-fledged claims, for example, which could affect the rate.

It's easy to check your own CLUE report. You can order it online from ChoiceTrust.com (opens in new tab), which also explains what to do if you dispute any information in the report. Also make good repairs and keep receipts in case the buyer's insurance company wants proof that any damages have been fixed.

Kimberly Lankford
Contributing Editor, Kiplinger's Personal Finance

As the "Ask Kim" columnist for Kiplinger's Personal Finance, Lankford receives hundreds of personal finance questions from readers every month. She is the author of Rescue Your Financial Life (McGraw-Hill, 2003), The Insurance Maze: How You Can Save Money on Insurance -- and Still Get the Coverage You Need (Kaplan, 2006), Kiplinger's Ask Kim for Money Smart Solutions (Kaplan, 2007) and The Kiplinger/BBB Personal Finance Guide for Military Families. She is frequently featured as a financial expert on television and radio, including NBC's Today Show, CNN, CNBC and National Public Radio.