So, you’re buying a new home in New Jersey. Congratulations. During the homebuying process, one of the most important steps you will take is buying homeowners insurance. Borrowers probably see the process as pretty straightforward. You find an insurance company. An agent will take your information, find out the value of the property, collect your premium and get the information back to your mortgage lender.
BUT, there’s another step that 99% of homebuyers know nothing about AND your insurance company is not going to disclose UNLESS it refuses to issue the coverage.
Here’s what you need to know: The insurance company will check the records to see what, if any, claims were filed against the property in the last 5 years. They check this against a large database called C.L.U.E. Stands for Comprehensive Loss Underwriting Exchange. The C.L.U.E. database maintains claim histories of individuals and properties for five years.
Insurance companies input information into the database to share with other insurers. This data is later accessed and used in determining whether to insure the property. This means even if you’ve owned a home and were a loyal, non-claim filing insurance customer for years, if you buy a house that comes up with a number of previous claims against it, you may not be able to get insurance if you buy that home.
Seem unfair? Perhaps. But it’s akin to a life insurance company selling life insurance on someone with cancer. Sort of.
To avoid any surprises, homebuyers should start shopping for homeowners insurance as soon as reasonably possible. No need to wait until 2 weeks before closing.
FYI, not all insurers use C.L.U.E. But about 90% do.
Just like personal credit reports, homeowners are entitled to review CLUE report by requesting a copy from a company called ChoiceTrust. The report will show you every claim filed over the past five years.
The database covers 27 types of losses: dog bites, flood claims, earthquake, wind, theft, vandalism, medical payments, etc. You can order an electronic report for $12.95 by visiting Choicetrust.
BUT, only the current homeowner can order a copy of the report. Prospective buyers cannot get a copy from ChoiceTrust.
However, you can always request that the current homeowner order and give you a copy as a condition of the sale. Now, you have the info you need to shop around for insurance and determine whether the home is insurable.
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{ 5 comments… read them below or add one }
holy crapola. i like this though. this way i know if the house had a bunch of claims for damage & i can’t get the nsurance, i probably wouldn’t want to buy the house. works for all except the person owning the home now. wonder what that person would do
@melloe, if the insurer uncovers information that makes the home uninsurable (by their guidelines), and the buyer still wants to buy the home, then the buyer must then find an insurer that will not check the C.L.U.E. database. Not ALL insurers use it. Most do. (Note: If the buyer wants to back out of the transaction because of a C.L.U.E. report, this language should be in the contract.)
From the seller point of view, any claims in the C.L.U.E. system remain for a 5 year period. So eventually they all fall off the database. Any insurance setback won’t be permanent.
cool info. gonna order my house report tomorrow. curious what they have on file. never heard this before at all.
Carol you have helpful information on this site. My sister ran into this problem 2 years ago and she still bought the house. She found some oddball company to insure it for a lot of money. Now there are problmes galore with both water and mold. How can it be a good idea to buy a house the insurance company don’t want to insure?
@jisop, I can understand how you feel. Insurance companies set their guidelines for how much risk they will take and what price we will pay for them to assume that risk – if they agree to assume it. Whether it’s life insurance, auto insurance, health insurance, etc. Some companies might insure with no hassle at all, others might insure at a higher premium, and the last insurer group just says “no” at any premium. Once the person seeking the insurance finds the coverage they need, they can always turn it down if the price is too high. Sorry your sister ran into those problems. Hope she had a good inspection done at purchase.
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