A Little About Homeowner's Insurance and Filing Claims

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I would bet that most people don't realize when they file an insurance claim it is recorded in a national database.  It is often referred to as a CLUE report (Comprehensive Loss Underwriting Exchange).  Insurance companies will access this database before they provide insurance on a new property.   What most people don't realize is even if an incident is reported and a claim never filed, it will still be recorded on the CLUE database.  Insurance companies have to protect themselves when they take on a property which they have no knowledge of, and this is one of the ways they protect themselves.

Let's say you have a leak in a hot water heater which does some minimal damage to a small area of flooring.  You are not real concerned about the cost of the repair, but, out of curiosity, you call your insurance agent just to see how much your deductible is.  You are debating whether to file a claim or just pay for the repair yourself.  You find out that the cost of your deductible is pretty close to the cost of the repair, so you make the repair and forget about it.  Chances are, whether you know it or not, and whether you approved or not, that incident will probably go into the national database. 

So what's the big deal on filing a claim?  One claim is usually not a big deal, but if the prospective insurer sees several claims filed over a relatively short period of time (even if they are small claims), they are going to ask themselves "Is there something wrong with this home?  Should we insure it?"  They may just pass on insuring the home, which means the buyer is either going to have to terminate the contract, or the buyer is going to have to find another insurer.  The insurer might agree to insure the home, but do it at a higher rate than normal and this might also run the buyer off. 

You might want to consider paying the minor claims yourself.  Let your insurance company pay the big ticket items.  Think of homeowners insurance the same way as catastrophic medical insurance.  Of course, if there has been damage, fix it and fix it the right way.  You don't want that repair coming back to haunt you or the next owner of the home.  When you are ready to sell your home, disclose the repairs on the Seller's Disclosure Notice and you will never be looking over your shoulder.  It is then the buyer's responsibility to investigate from there.  And remember, if you don't disclose the claims on the seller's disclosure notice, when the buyer's insurance company finds out and contacts the buyer, "you got some s'plainin to do Lucy!"