Watch Out for a History of Insurance Claims
Buying a home might be the most significant financial decision you make. Before making an offer, you'll need to consider a host of factors, from how much you can spend each month on a mortgage payment to whether you want to live within walking distance of public transportation to how many bedrooms and baths your ideal home will offer. You should also consider a home's history of insurance claims. This history could help you determine how much you'll spend each year maintaining your new residence. Click through to learn more.
Why a home's claims history matters
Suppose you are buying an existing home, one that has had a previous owner or several owners. In that case, it's essential to research the history of insurance claims these previous owners made on the residence. Is this a home whose previous owners have filed many insurance claims? That could be a sign that the home you are considering has structural or other problems that could prove costly.
A home with a long history of claims could prove expensive to insure, too. When you take out a mortgage loan, your lender will require that you also pay for a homeowners insurance policy. That policy might cost you more if your insurance provider determines that the home you are buying has had a long history of claims already filed against it.
For instance, maybe two previous owners filed insurance claims regarding roof damage from hailstorms. This could mean your home's roof should be made of a more durable, hail-resistant material. If you don't fix the problem, you could also face a hail-damaged roof in the future. Your insurer might charge you a higher premium if you don't change your home's roof.
Can you negotiate a lower price?
You might be able to negotiate a lower sales price if you buy a home with a lengthy claims history against it.
Maybe the previous owners filed a claim regarding mold damage. You might mention that when negotiating the home's sales price, hoping that the owners provide you with a discount to ease any concerns you might have regarding a home that has had previous mold issues.
How to learn about a home's claims history
You can learn about a home's history of claims through the Comprehensive Loss Underwriting Exchange, better known as CLUE. This is a database that tracks insurance claims filed on homes.
Homeowners can receive one free CLUE report from LexisNexis every 12 months. This report will show the number and type of claims that have been filed on the property within the last seven years.
Only an owner, insurer or property lender can obtain a CLUE report. As a buyer, though, you can request that the seller of a home order a CLUE report and share it with you. This way, you can study the home's claims history before buying it. And if the sellers refuse to provide you with a CLUE report, you might reconsider making an offer.