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Buying a Home? For goodness sake, get a CLUE!

C.L.U.E. stands for the Comprehensive Loss Underwriting Exchange Ventura County Home Disasterwhich is a huge database used by the insurance industry to track claims homeowners file against their homeowner’s insurance policies. This information helps insurers of Ventura County real estate avoid fraud and writing policies for people who make excessive claims, but this information also follows the home the claim is made on. Just like having a bad credit record affects your ability to get financing for a home, negative information in the C.L.U.E. database can affect whether or not you can get a homeowners insurance policy and at what price.

Ventura County home buyers should find out if the C.L.U.E. report has negative information as soon as possible during a real estate transaction to ensure you don’t receive an unpleasant surprise at the last moment. Imagine the following scenario: A young couple signs a purchase contract for a nice starter home. With all the things involved with buying their first home, they put off getting homeowner’s insurance until just before the closing only to be denied coverage because of a water related insurance claim the sellers had filed a couple of years before. Although the damage had been fixed, the claim had flagged the house as a high risk for mold. Only after contacting several insurance companies do the buyers finally find one that will insure them-at double the standard premium. In the end, it could have been worse; some buyers have obtained insurance only to have it cancelled a couple of months after escrow closed because of negative information in the C.L.U.E. database. If this happens to you, you might be forced to use an insurer obtained by your lender costing many times more than you were paying, and with coverage not nearly as good.

This started to become an issue around 2003. The insurance industry was facing tough times. In the 1990s, insurers were hit with an extraordinary number of catastrophes, including earthquakes and tornadoes, requiring them to pay out some $700 million a month in claims. Another issue was the nations housing stock is aging. With age comes the need for more repairs and costs for home repairs and rebuilding continue to rise each year. And perhaps most importantly, insurance companies suffered some big investment losses. The stock market is no longer providing insurers the handsome returns on invested premiums it did in the past. As a result of all this, insurance companies have tightened up on the types of policies they will write. The information in the C.L.U.E. database plays a major role in their decision making process.

How to do you order a C.L.U.E. report for a Ventura County home you’re buying? Some Natural Hazard Report companies now provide this option. Choice Point is the name of the company that maintains the C.L.U.E. database. Homeowners can visit their website at www.ChoiceTrust.com and order a C.L.U.E. report online for $19.50. You may want to ask for one when you make an offer to buy a home. The current California Association of REALTORS’ Purchase Contract contains a clause that requires sellers to disclose to the buyers the claims history of the property, but a seller can only tell the buyers what they know. If they’ve only lived in a home for a short time, they may not be aware of the entire claims history and the C.L.U.E. report may contain information that they are unaware of.

As an aside, I was selling a Ventura home for a client that had purchased it only the year before. The buyer’s agent called to ask me about the two people who had died in the property. Huh? She claimed that information was on the C.L.U.E. report and the buyer’s had been turned down for a home owner’s policy. Fortunately, I knew the family who had owned the home for many years previous to the current owner. She assured me that her family was all accounted for and no one had died in the home. To this day, I have no idea why that would even be on a report much less why it mattered! (The buyers did get insurance from another company and we closed as scheduled.)

You may also want to consider opting for a higher deductible on your homeowner’s policy to avoid smaller claims that could give your insurance company reason to cancel you. A deductible of $1,000 can decrease your premiums by as much as 25%. Be aware that even talking to your insurance company about damage to your home or a potential claim could cause an entry to be made in the C.L.U.E. database-even if you never make a claim! This could cause a major problem for you if you get cancelled and have to obtain new coverage. It could also complicate the sale of your home if the buyer cannot get an insurance policy. Remember that it is better not to wait until the last minute to arrange your homeowner’s insurance.

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