|
|
|
|
Who We Are
Money Focus Mutual Funds Insurance Mortgages Taxes Step by Step Hot Topics Contact the Editor
Featured Site AfterHourTrades.com, Inc. Featured Columnist: |
Home Insurance
Without a CLUE
With every good mystery, a clue is needed. Only in this case, the clue might be the very reason you have lost your homeowner's insurance, been denied coverage, often at closing, or found that after you purchase your dream home, you might be in breach of the contract you just signed.
None of these scenarios sounds very good but they are all fully legal, a change in the insurance industry that is catching many by complete surprise.
The Comprehensive Loss Underwriting Exchange or CLUE has become the new roadblock for many homeowners and the cause of the largest growth in complaints at state regulatory agencies over the last year. The insurance industry has kicked up its efforts to use the information about the home and the owner to deny or cancel policies. This change can have catastrophic consequences that are, in many instances, unforeseeable.
Let's start first with current homeowners. These folks are finding that multiple claims on their home can raise rates to astronomical levels and in many cases, policies can be canceled as a result of poor CLUE information. The law allows the industry to keep records on claims made by homeowners for up to five years. If you make more than one claim during that period or as some homeowners have found, simply asking about possible coverage can create an open claim, or as many refer to it, a black mark on your policy.
That mark is not something your insurance agent is required to disclose. So, theoretically, if you ask your agent if your septic tank is covered on your policy, he or she can open a claim on the tank. If something else happens to the property such as wind damage to your roof in that same five year window, the agency can see those two claims as open and take action without regard to the status of those claims. Those claims can cause your insurer to raise rates in conjunction with the assumed increase in risk for the insurer or cancel the policy.
It is a cold financial reality of a much maligned industry as they continue to make getting insurance a necessity and keeping coverage harder. This could put homeownership well out of reach for the average citizen, or as state regulators worry, specific groups whose risk might be higher because of minority affiliation.
While the insurance industry sees the program, now receiving claims information from over 90% of the insurers nationwide, as a tool in providing consumers the best coverage with the appropriate premiums, consumer groups disagree. Providing loss histories can effect how the loan is written, whether the buyers qualify, and if they do choose to cover the purchase, how much those premiums will be.
For those about to purchase a home, given enough time the agent will assess the CLUE information about the buyer and write their proposal with that information in mind. Acting as a credit report does, the information affects the home owner in ways they may not be aware of, much as they were unaware of the effect of credit reporting ten years ago. But what the buyer may also be unaware of is the report done on the property. Even if the house appears insurable, buyers are increasingly denied at closing because of the marks on the home they are buying.
This is not likely to change soon. State insurance regulators have been flooded with complaints about the practice. They will, if the claim is provable, act as advocate between you and the industry, often getting erroneous information changed. But the real burden of proof is with you.
Much like a credit report, the information is held confidential. It is available to only the buyer and the lender. To receive a copy of your report, CheckTrust.com, a division of Checkpoint Underwriting Services will sell you a bundled report for under twenty dollars. This package contains info about not only the house you are buying (or selling), but your claims history as well as a credit report.
The second thing is a little more difficult and may prove to be the economic straw that breaks the homeowner's backs. Seen as discriminatory to certain economic groups, state regulators have challenged the recording methods of the industry. Financial preparation before buying a home is often difficult enough without planning above and beyond the actual purchase. Ask before looking into a claim or whether previous claims have been made and whether it is then insurer's policy to report the inquiry. Some do; some don't.
In many states, legislation is currently underway or being discussed on how make this a more consumer friendly tool into the history of the house they are purchasing (or selling) and whether they qualify for the insurance required by the lender. Check with your state's insurance regulator for further assistance and information about pending legislation.
|
