Get a CLUE About Homeowners Insurance

Homeowners’ insurance premiums and the lack of available coverage have become significant barriers to homeownership. Most affected are those who have no credit history and existing homeowners who have water-related claims.

The Comprehensive Loss Underwriting Exchange database holds claim histories of individuals and properties for five years. Insurance companies share this database in determining whether to insure you and your property. So even if you've owned a home and have been a loyal insurance customer for a number of years, if you buy a house that comes up with a number of claims against it, you may not be able to get insurance on that property with certain companies.

Also, companies are tightening underwriting criteria for potential policy owners and properties themselves. Some insurers are not renewing coverage for existing homeowners with poor credit or who file too many claims. And underwriting requirements on properties have been tightened to ban properties with prior water damage.

The Insurance Information Institute says the average cost of homeowners insurance increased by 9 percent last year and is expected to rise another 10 percent this year. But many homeowners have seen increases ranging from 30 to 70%.

The insurance industry says the increases stem from a variety of factors, including catastrophes like Hurricanes and Earthquakes that have occurred in recent years. Insurers have paid out billions in catastrophe-related losses - much more than in previous decades.

Another contributor is mold. Multi-million dollar jury awards, sensationalized reporting in the media and profiteering by some individuals have led to an explosion in mold claims and costs, the Insurance Information Institute says.

In Texas, for example, mold claims in 2001 cost insurers more than $850 million compared to virtually nothing just a few years earlier. Water claims accounted for 32% of all claims in 2001, up from 24% in 1997.

Just because you and your spouse have an unblemished insurance record, that doesn't mean the house you're eyeing does. When an insurance company considers whether to offer you insurance, they're not just looking at your history, but the history of the property in question.  Potential homebuyers should make Homeowners Insurance a priority when house hunting and should not take their insurability for granted.

One way to examine the house's claims history is through its CLUE Report. About 600 insurers, making up about 90 percent of the market, feed into the CLUE database. The report will show you every claim filed over the past five years.

The database covers 27 types of losses, including dog bites, flood, earthquake, theft, vandalism, wind, and medical payments. Prospective buyers can't request a report directly, but they can ask the homeowner to provide a copy as a condition of the sale.

You would then be armed with the information you need to shop around for insurance and determine whether your would-be house is insurable. If it's not, you can back out of the deal -- if you make it a condition of the sale.

There is also an upside to having the report.  It could also indicate factors that can be attractive to you as the buyer.  If you're buying an older home and the roof was replaced because of storm damage, you may be very happy knowing you are getting a newer roof.  

Additional tips for saving on Homeowners Insurance: