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Insurance companies keep a huge database on your home that not only tracks claims, it also looks for risks such as toxic mold. That's why homeowners with even minor water damage are being canceled -- and are sometimes unable to sell.
You probably know that it’s not a good idea to make too many claims on your home owners insurance policy because your insurer could drop you. What you might not know is that making a claim could make selling your home more difficult down the road. What’s more, you could find your home’s value damaged or a sale jeopardized even if a previous owner, and not you, made a claim. Insurers increasingly are using a huge industry database, called the Comprehensive Loss Underwriting Exchange or CLUE, to drop or deny coverage based on a home’s history of claims or damage reports.
Insurance companies are terrified of rising losses from water and mold damage. So a single report of water-related problems may be enough for insurers to shun your home.
But the company that operates CLUE, ChoicePoint of Alpharetta, Ga., said that the database collects damage reports as well as claims. The information stays in the database for up to five years.
Insurance companies get aggressive
In previous years, insurers used the CLUE database in large part to watch for fraud and for consumers who had a history of filing numerous claims.
After losing billions of dollars on homeowners insurance in recent years, however, insurance companies have become more aggressive about screening for other risks -- including damaged homes that could spawn future claims.
The insurance industry is notorious for its manic-depressive cycles. In profitable years, companies will slash premiums, boost coverage and take on big risks in hopes of gaining market share. When those risks start costing real money, the companies sound the full retreat -- hiking premiums, dropping customers and shunning risk.
What’s notable about their most recent mood swing was how quickly it happened, spurred in large part by last year’s losses and the massive increase in mold-related claims, especially in Texas and California.
How to protect yourself
While you can’t do much about insurers’ overreactions, you can do something to protect yourself in this particularly difficult time. Among them:
- Keep your home in good repair. A solid, watertight roof, good plumbing and a decent paint job can protect your home from various water disasters -- the kind of damage that’s scaring insurers the most these days. It’s a good idea to regularly check the hoses on your clothes- and dish-washing machines, since cracked or burst hoses often lead to serious water damage.
- Keep your deductible high. Pay for smaller expenses out of your own pocket. Homeowners insurance should be reserved for the big disasters, not the little problems you can easily pay for yourself.
- Think twice about water-related claims. This is especially true if you plan to sell within a few years. You could be better off paying to repair the problem yourself rather having your home be branded as high risk.
- Don’t tell your insurer about problems unless you’re sure you’ll file a claim. This last piece of advice is unfortunate, because insurers and insurance agents can be a decent source of counsel on whether it’s worth filing a claim. Since any damage you report could get passed on to the CLUE database, however, it’s smart now to err on the side of caution.
- Consider getting a copy of your CLUE report. If you’ve been denied insurance, you can get a copy of your home’s CLUE report for free; otherwise, you’ll pay about $9. You have a right under federal law to dispute any erroneous information on the report. To get a copy, contact ChoicePoint. CALL YOUR INSURANCE AGENT TODAY AND SEE WHAT THEY THINK ABOUT YOUR EXPOSURE AND RISKS!
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