6 ways to avoid home insurance snafus

If you are considering purchasing a home, ask the seller for a CLUE report. Prospective homeowners can't pull CLUE reports for properties they don't yet own, but they can ask the current owner to provide one. Even if the house appears to be perfectly fine, a past inquiry from a previous owner about minor water damage could cause your insurer to deny coverage on that home -- and derail a scheduled real estate closing. It may be a good idea for a prospective buyer to insert a clause in the purchase contract demanding the right to review a CLUE report prior to closing.

5. Consider hiring a public adjuster

If you are facing a catastrophic claim, and if you're concerned that the settlement won't be high enough to repair, it may be useful to hire a public adjuster before contacting your insurance company. Public adjusters assist homeowners in the documentation process following an instance of property damage, and they present the claim to the insurance company on behalf of the policyholder. Since they are hired by the homeowner, rather than the insurance company, they work for the homeowner's interests.

"We come out immediately (after a loss), view the damages, and most importantly, we review the insurance policy to verify coverage," says Keith Hayman, regional public insurance adjuster for Adjusters International in New York, N.Y. "We are licensed as experts in (homeowners insurance) policies," he says. Public adjusters can help homeowners understand whether or not their policy offers replacement coverage for a home that is completely destroyed, and they will discuss the likelihood of property damage that is not immediately visible.

Before hiring an adjuster, make sure the person is properly licensed in your state, and there are no complaints or disciplinary actions on file against that person. Your state insurance department has this information. Also, ask the prospective adjuster for references, and check them. Understand how much the adjuster charges. Beware of anyone who requires a large upfront fee. "We generally charge a 10 percent contingency on the settlement of the claim," says Hayman. To find a local adjuster, ask friends for recommendations, or look in the member directory of the National Association of Public Insurance Adjusters.

6. Don't be afraid to file a claim when necessary

Fear of a policy cancellation should not deter a policyholder from filing a claim when necessary. Big or small, losses happen. Even insurance agents and their families are not immune. "It happened to my wife. She lost a diamond once," says Rackley. If your claims are not frequent, you can still be regarded as a good customer.

"Decent insurance companies do not cancel their clients because they file a claim," says Young. "Insurers don't want to penalize people for claiming the big stuff as long as the claim is legitimate and it doesn't happen too often," says Braun.

Homeowners insurance policies are designed to provide owners with a level of security and protection against major property damage. If homeowners are knowledgeable about their past history, their present coverage and the process for filing a future claim, then they are in a good position to avoid expensive policy surprises.


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