I dealt with an interesting situation this past week I believe is important to share with anyone buying a home. It reminded me why it’s so important for home buyers to review home insurance during the option period, not after it’s expired.
A local realtor asked me to talk with one of her clients who’s buying a home in Keller. I gathered the information needed to quote the home insurance and confirmed they are closing the following week. I created quotes with all my carriers and selected the best one. Before emailing the quote, I ran a CLUE report.
CLUE is the abbreviation for Comprehensive Loss Underwriting Exchange, and it is the report which shows prior claims by the home buyer, as well as on the home being purchased. The reason it’s important to review the CLUE report is that claims filed by the buyer, or on the home being purchased, may impact the home insurance rate. In some cases they may even lead a company to decline offering coverage.
Each home insurance company looks at prior claims differently. In the case of a home purchase, some companies are only concerned about prior losses filed by the buyer and ignore homes on the risk, or the home being purchased. Their reasoning for not counting claims on the home being purchased is that they were filed by the seller. There are instances, however, they may want information such as what caused the claim and confirmation repairs were made.
Other insurance companies count both prior claims filed by the buyers, as well as those filed by the sellers on the home. The reasoning why they count both is that since they are willing to offer a policy on home, they are taking on the risk, or home, and they should be used to compute the rate on the home buyer’s policy.
I discovered two prior claims on the home being purchased, one of which had been filed in June of this year. Before emailing the two quotes I recommended, I reviewed the claims with my underwriters to confirm if they would impact the rate, as well as what additional information they’d need to write the policy. I included the CLUE report with my quotes, and called the realtor to discuss the most recent claim. I needed to confirm what caused the claim and that repairs were made.
Apparently, I was the only insurance agent who bothered to share the results of the CLUE report with the buyers or the agent. The sellers hadn’t included the claim and related repairs in the sellers’ disclosure, which further complicated matters. With closing scheduled for this week, the buyers had to decide whether to proceed with the purchase or not.
The good news for everyone is the sellers were able to provide full documentation on the claim and the repairs they made. The buyers accepted the explanation and documentation, and are proceeding with the purchase. What astounds me is none of the other agents who quoted home insurance for the buyers informed them of the prior claims. In my mind, there’s no good reason to do so.
I believe home insurance should be checked before the inspection is done and prior to the end of the option period. All prior claims on the home should be shared with home buyers so they are able to determine if they want to proceed with the purchase and confirm necessary repairs were made. Agents should volunteer this information, however, buyers should also confirm the agent has run the CLUE report and what it shows. Doing so, helps everyone avoid last minute negative surprises.
What do you think? Share your comments, questions, and experiences with me on my Google +, Facebook, and LinkedIn pages. I’d love to hear from you!