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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.Many previous claims can mean you won't get coverage.
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.
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 LexisNexus. 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.
Shop for a homeowners insurance policy before you close.
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 LexisNexus, 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.