Homebuyers: Get
a CLUE About Homeowners Insurance
By Michele Dawson
As the busy spring real estate season opens in just
a few weeks, smart buyers are doing their homework
by getting loan pre-approval, scouting out neighborhoods,
and getting a realistic idea of how much house they
can afford. But now there's another item to put
on the to-do list - make sure you can get homeowners
insurance.
Just a few weeks ago National Association of
Realtors President Cathy Whatley told a group
of reporters at the National Press Club that homeowners
insurance premiums and the lack of available coverage
have become significant barriers to homeownership.
Most affected are those who have no credit history
and existing homeowners who have water-related
claims, she said.
Whatley questioned insurers' use of credit scores
and the Comprehensive Loss Underwriting Exchange
database, which holds claim histories of individuals
and properties for five years. Insurance companies
share this database in determining whether to
insure you and your property. So even if you've
owned a home and have been a loyal insurance customer
for a number of years, if you buy a house that
comes up with a number of claims against it, you
may not be able to get insurance if you buy it.
NAR says insurance companies have reduced the
number of policies they are writing; one of the
largest companies did not write new policies in
30 states late last year, and is only now returning
to some of those states.
Also, companies are tightening underwriting criteria
for potential policy owners and properties themselves.
Some insurers are not renewing coverage for homeowners
with poor credit or who file too many claims.
And underwriting requirements on properties have
been tightened to ban properties with prior water
damage.
The Insurance Information Institute says the
average cost of homeowners insurance increased
by 8 percent last year and is expected to rise
another 9 percent this year. But many homeowners
have seen increases ranging from 30 to 70 percent.
The insurance industry says the increases stem
from a variety of factors, including catastrophes
like Hurricane Andrew and the Northridge Earthquake
that occurred in recent years. Over the past 12
years insurers paid out more than $100 billion
in catastrophe-related losses-about $700 million
per month-many times more than in previous decades.
Another contributor is mold. Multi-million dollar
jury awards, sensationalized reporting in the
media and profiteering by some individuals have
led to an explosion in mold claims and costs,
the III says.
In Texas, for example, mold claims in 2001 cost
insurers more than $850 million compared to virtually
nothing just a few years earlier. Water claims
accounted for 32% of all claims in 2001, up from
24% in 1997.
Meanwhile, Whatley advised potential homebuyers
to make homeowners insurance a priority when house
hunting.
"In light of today's insurance crisis, homebuyers
should not take their insurability for granted,"
she said.
Just because you and your spouse have an unblemished
insurance record, that doesn't mean the house
you're eyeing does. When an insurance company
considers whether to offer you insurance, they're
not just looking at your history, but the history
of the property in question.
One way to examine the house's claims history
is through its CLUE report. About 600 insurers,
making up about 90 percent of the market, feed
into the CLUE database. The report will show you
every claim filed over the past five years.
The database covers 27 types of losses, including
dog bites, flood, earthquake, theft, vandalism,
wind, and medical payments. You can order an electronic
report from Choicepoint, the company that owns
the CLUE database, for $12.95 by visiting Choicetrust.
One caveat: you can't order a copy of a report
unless you own the home. Prospective buyers can't
request a report directly from Choicepoint.
"But there's nothing stopping you from asking
the homeowner to provide you with a copy as a
condition of the sale," Texas real estate
broker Karen Wilson told insure.com.
You would then be armed with the information
you need to shop around for insurance and determine
whether your would-be house is insurable. If it's
not, you can back out of the deal -- if you make
it a condition of the sale.
Choicepoint vice president Richard Collier said
the reports could also indicate factors that can
be attractive to buyers.
"If you're buying an older home and the
roof was replaced because of storm damage, you
may be very happy knowing you are getting a newer
roof," he said.
In the meantime, the III offers additional tips
for saving on homeowners insurance:
- Make sure you take advantage of every discount
you are eligible for. Insurance companies offer
many discounts, including discounts for loyal
customers and to those who insure their home
and vehicles with the same company.
- You can save money if your residence is equipped
with smoke detectors and by installing certain
home security devices.
- Raise your deductible. Higher deductibles
could produce savings of 15 to 30 percent or
more.
- Maintaining good credit will also help you
save on home insurance.
Also, because insurance companies use your credit
history in determining whether to insure you and
what rate, you should get a copy of your credit
report to make sure it's accurate.
The Realty Times
Published: March 11, 2003
www.RealtyTimes.com
|
