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When Buyers Don't Have a C.L.U.E

This is a re-post of a blog post I did last year on C.L.U.E. reports. I was recently asked about them so I thought I’d share this information again with a couple of updates.

If you believe like I do that insurance is only affordable if you never use it —think again. Did you know that your insurance rate on a new home can be influenced by previous insurance claims made on the property? Claims that you didn’t file, benefit from or have any knowledge of? Enter the C.L.U.E. Report.

In other words, you can have a stellar credit score, no previous insurance claims and you think you’re golden, that is until the insurer requests a C.L.U.E. report on the property and the result is a much higher premium than anticipated.

The C.L.U.E. report is generated through a shared database of insurance claims known as the Comprehensive Loss Underwriting Exchange which keeps five years of history for every insured home. Buy a home with multiple insurance claims and you are likely to pay the rate that the previous owners earned, your lack of claims made and good credit notwithstanding.

Typically, in a real estate transaction, the insurance binder is purchased just before closing and there isn’t much discussion about it beforehand, so you may not even be aware that you are being penalized via a higher rate because of excessive claims made by the previous owner of the property; however, with all the recent hurricanes and flooding, insurers are getting less likely to issue a binder without a thorough vetting of the home’s loss history.

As a potential buyer you cannot request a C.L.U.E report for a property that you don’t own but you can request the seller do so. Everyone is allowed an annual free report so this may be a reasonable request to make of a seller if you are seriously considering a purchase. You may want to expedite the receipt of a C.L.U.E. report to avoid any pleasant surprises at the end of the transaction, when you’ve spent money and time preparing to purchase the home.

For buyers, the C.L.U.E. report may reveal a claims history regarding an ongoing or chronic problem, a community problem (burglaries) or other environmental claims (mold) that could tip you off to problems that may make the property unsuitable for you. You may want to expedite the receipt of a C.L.U.E. report to avoid any pleasant surprises at the end of the transaction. Sellers that have not made excessive insurance claims shouldn’t object to providing the C.L.U.E. report on their home to reassure a buyer that the premium is not influenced by prior claims or chronic issues with the home but based upon the ridiculous rates that we pay in CT for homeowners insurance, regardless of credit, material fact or prior claims.