The rambler or split-level you’re eyeing looks perfect in every way, but prior damage and other issues may be lurking in the house’s backstory. These are details you’ll want to know about before signing the closing papers. And you can, thanks to a free tool that lists insurance losses on a property going back seven years.
The majority of home insurance companies contribute claims history information to a database called the Comprehensive Loss Underwriting Exchange, or CLUE. Underwriters use the information in a CLUE report to rate insurance policies.
“They look at the claims history to see if the person applying for insurance hasn’t disclosed a certain condition or indicator of how the property is being maintained, or if there are several instances of the same type of loss,” says Robert Passmore, senior director of personal lines policy for the Property Casualty Insurers Association of America in Chicago.
“They match that information to their insurance underwriting rules, which vary from company to company,” he adds.
These same facts and figures can help a homebuyer determine whether to buy a particular house and how difficult and costly it might be to get homeowners insurance on the property.
If you’re clueless about CLUE, don’t feel embarrassed. A recent survey commissioned by insuranceQuotes.com — a website in the Bankrate family — found that 82 percent of Americans have never heard of the database or the reports associated with it.
A home’s CLUE loss history report provides insurance company names and policy numbers and any claim numbers. The report lists the dates of any claims, the loss types and amounts paid for losses, and it will tell if a claim was denied.
Weather-related losses, fires, theft, vandalism and water damage are some of the types of claims listed, says Passmore. But the report doesn’t indicate what part of the property or home was affected. You’d need to ask the homeowner for those details.
A report might be blank, for two reasons:
“Claims for the property under a different owner also won’t be included either, and therefore not considered when rated for insurance,” says Jeffrey Ill, a vice president for homeowners insurance at Esurance in San Francisco.
A free CLUE report can be obtained once a year from database giant LexisNexis. Requests can be made online or by calling (866) 312-8076.
Here’s the catch for a homebuyer: Only the owner of a property may access its CLUE report.
“You must request the report from the owner of the home you’re considering buying,” says Karl Newman, president of the NW Insurance Council in Seattle.
Newman says a savvy seller should obtain a CLUE report before showing the home, make several copies and have those available for potential buyers.
Even a homeowner who’s not in the market to sell may want to get a CLUE report — to check for any inaccuracies.
“Since the CLUE report is one of many pieces of information that an insurer might look at, what is in the report can influence your premiums positively or negatively,” says Passmore. “So if there are any inaccuracies, it’s important to get them corrected, just as it would be for your credit report.”
A consumer armed with a CLUE report should examine it for any claims that could lead to skyrocketing home insurance premiums. These include fire, burglaries and physical damage to the structure.
“If there’s a hazard on the property and someone fell into a hole, a claim would ensue,” Newman says. When the property has experienced multiple burglaries, that can mean that it needs an alarm system, he notes.
Claims might also indicate issues with the physical location of the property that can affect premiums, says Passmore. If it’s close to the water or known to flood frequently, insurance can cost more.
A recent claim can have positive ramifications if the damage was addressed properly, says Michael Barry, a spokesman for the trade group the Insurance Information Institute in New York.
“For example,” he says, “if a roof was damaged by a windstorm and replaced by a new one, this would actually make the house more desirable to an insurance company.”
Potential buyers should use the CLUE report to let their home inspector know of any repairs that have been made, says Newman, so that the inspector can make sure the work was done correctly.
A CLUE is not a secret database, and it gives no score or recommendations, Newman points out. It just tells what happened in and outside the home. It doesn’t take the place of an inspection or disclosures from the seller.
“It’s an additional tool to evaluate the home and the cost of homeowners insurance,” he says.