insurance

6 ways to avoid home insurance snafus

In some states, CLUE reports could include information about inquiries homeowners make about their policies, even if they never file a claim. So if you called your insurer to ask what you should do about a broken window, the call could go on your record as a report of damage to your property. That, in turn, could be the basis for denying insurance in the future.

Consumers can learn what's included in their claim history by getting a CLUE -- that is, asking for a free copy of their personal report. CLUE files are administered by ChoicePoint, a data collection company near Atlanta. ChoicePoint's consumer Web site, www.choicetrust.com, offers options for ordering reports online. Under the Federal Credit Reporting Act (the same law that allows people to view their credit reports), a CLUE report can be obtained for free once every 12 months. CLUE files can also be obtained at any time if a prospective insurance company denies coverage or makes any other adverse decision based on information in the report.

3. Your claims history is only one portion of your risk profile

In addition to pulling CLUE reports, insurance companies gather personal data from other sources to determine a homeowner's risk for reporting future claims. This risk profile is often expressed as an insurance score.

"There are so many things that could go into your insurance score: your past claims history, your credit scores and your driving record, to name a few," says Mark Rackley, an agency owner with Allstate Insurance Co., in Davidson, N.C. The score is an actuarial math model that places everybody in different risk tiers, he explains. So tier one could include the top 10 percent of people in the population who will likely never file a claim. Tier 10, on the other hand, would include the group with the worst claims history.

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Rackley says that each company uses a different model for computing an insurance score, and it is nearly impossible to determine what that score would be before a customer applies for insurance. However, each homeowner can expect to be placed somewhere on the risk spectrum. "Every company uses an insurance score. And your score is going to dictate the rate you pay," he says.

Since companies weigh different aspects of a risk profile differently, it is beneficial for homeowners to shop around for a policy that is the best match for their circumstances. For example, a consumer with a long claims history but excellent credit may find a lower rate with an insurer that puts more emphasis on a high credit score. On the other hand, a consumer who does not have stellar credit, but has no background of claims or inquiries, may find better premiums with a provider who puts more weight on a clean claims history.

4. Your house could be a red flag

Even if your credit is great and you have no history of claims, you could still encounter higher rates based on a home's past. Any damage reported on that property, even if it occurred before you lived there, will adversely affect your insurance.

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