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Resources: Newsletter Articles: The CLUE to Insurability

Insurers claim they have suffered heavy losses due to a sharp increase in mold and water-related claims. Two companies, Travelers and California Insurance Group, are no longer providing insurance coverage for properties with previous flood, water or fire damage because of the potential for mold. Homeowners have seen premiums skyrocket, or policies cancelled because of a single inquiry. Escrows have been delayed as buyers struggle to obtain affordable coverage, or find that some properties are not insurable.

Past Claims Can Hurt You

While you might not know about a home's past insurance claims, you can be sure that your insurer does. Ninety percent of home insurers subscribe to CLUE (Comprehensive Loss Underwriting Exchange), a database of homeowners' insurance claims histories.

A simple question about coverage can trigger a report to the CLUE database. And, even if consumers fix a problem so that it no longer presents a loss exposure to the insurer Ð removing a fallen tree or fixing a leaky roof, for example Ð it can still be reported as a 'claim' to the CLUE database.

When a buyer applies for home insurance, the insurer obtains CLUE reports on the buyer and the property... and totals all of the claims over the previous five years to determine insurability and cost. In addition to making some properties or buyers uninsurable, past claims can double or even triple premiums.

"The homeowner's insurance market place is very difficult to navigate. We strongly recommend that you create a business relationship with a predominant insurance broker in our community to minimize your risk," says D.J. Grubb, of The GRUBB Co.

Your CLUE Report

The federal Fair Credit Reporting Act (FCRA) requires ChoicePoint to provide homeowners with copies of their CLUE reports, and to correct mistakes on the reports.

You can get a free copy of your CLUE report if you are denied insurance due to information contained in it. Additionally, if you have a dispute with an insurer about the information in the report, you can ask that your account of the events be included in the report. A link to ChoicePoint is provided on the GRUBB Co. website, at http://www.grubbco.com/.

Changes Coming

The California Association of Realtors (C.A.R.) reports that State Insurance Commissioner John Garamendi has released a draft advisory notice for comment that clarifies that insurance providers can't characterize a simple inquiry as a claim or use it to negatively impact the insured's CLUE score, or use a loss-exposure issue that has been corrected.

What You Can Do To Protect Yourself

Part II of this article will be published in next month's newsletter, and provide information on how to educate and protect yourself. In the meantime, please call me with any questions.

The CLUE to Insurability, Part II

Part I of this article revealed that asking your insurance company a simple question about coverage can trigger a report to the CLUE database used by insurance companies to track claims. And, even if a problem is fixed so that it no longer presents a loss exposure to the insurer, it can still be reported as a 'claim'.

When a buyer applies for home insurance, the insurer obtains CLUE reports on the buyer and the propertyÉ and totals all of the claims over the previous five years to determine insurability and cost. In addition to making some properties or buyers uninsurable, past claims can double or even triple premiums.

Your CLUE Report

The federal Fair Credit Reporting Act (FCRA) requires ChoicePoint ( http://www.choicetrust.com/ ) to provide homeowners with copies of their CLUE reports, and to correct mistakes on the reports.

You can get a free copy of your CLUE report if you are denied insurance due to information contained in it. If you have a dispute with an insurer about the information in the report, you can ask that your account of the events be included in the report.

Educate and Protect Yourself

Keep your home in good repair. A solid, watertight roof, good plumbing and a decent paint job can protect your home from the kinds of water damage that are scaring insurers these days. Remember to check the water hoses connected to your washing machine and dishwasherÉ every yearÉ since cracked or burst hoses often lead to serious water damage.

Keep your deductible high. Homeowners insurance should be reserved for the big disasters, not the little problems you can easily pay for yourself. Pay for smaller expenses out of your own pocket.

Don't tell your insurer about problems unless you're sure you'll file a claim. Your insurance agent can be a decent source of counsel on whether it's worth filing a claim, but your question may trigger a report to the CLUE database. Err on the side of caution.

Think twice about water-related claims. This is especially true if you plan to sell within a few years. You're probably better off paying for the repairs yourself than having your home branded as high risk.

Consider getting a copy of your CLUE report. If you've been denied insurance you can get a copy of your home's CLUE report for free; otherwise, you'll pay about $8. You have the right under federal law to dispute any erroneous information on the report.

Shop around for coverage. Don't get discouraged if your insurer denies you a policy based on previous claims, or the rates are simply unaffordable. You should obtain quotes from at least three other insurers so you can compare premiums and coverage options. Some companies will give you a discount if you insure both your car and home with them.



Sherry Benninger

sherrybenninger@grubbco.com

The GRUBB Co., 1960 Mountain Blvd., Oakland, CA 94611

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