Homeowners Insurance Coverage, 5 Myths Debunked

Did you know, that something called a CLUE report can be critical when you’re buying a home?

CLUE stands for Comprehensive Loss Underwriting Exchange and might also be known as a Letter of Experience or simply Property Insurance History. This report details all insurance claims made against a specific property, typically within the past 7 years.

The property’s insurance history can only be requested by the home owner, the lender or insurance company, and here in Arizona it is required by the purchase agreement, that a home seller provide the report within five days of a fully executed contract.

What a home buyer will find in the CLUE report includes:

Date of loss
Type of loss
Amount the company paid

Insurance companies generally report claims for which they have paid out money, any claims denied, and often even files that were set up for possible claims.

How does this help you as a home buyer? The CLUE report will reveal any damage to the home that may not appear in the home seller’s disclosure as it is generated for the property address and not exclusively for the current owner’s occupancy. Some incidents in a property’s background may even cause a home buyer to reconsider their home purchase.

But the CLUE report has another, more important purpose as well. Insurance companies use a CLUE report or Letter of Experience to determine the property’s likelihood of future claims, possibly causing the home’s prospective insurance rates to be higher. Events such as remediation for Mold and mitigation of Radon have become so commonplace that insurance companies are hyper aware and mindful of these health and safety concerns.

This serves as guidance to home owners as well. Careful consideration prior to making a claim against your homeowner’s insurance is highly advisable. A frivolous claim could ding the value of your home. The tips below will be helpful in determining how your coverage works and whether or not a claim is feasible.

5 Big Myths About Your Homeowners Insurance Coverage

By John Voket

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Until it happens, most homeowners think of disasters as something that won’t happen to them. Disasters can be as minor as a tree branch falling and breaking a few windows, or as concentrated as a pinhole roof leak slowly dripping water into a residence—causing mold or other ripple effects. Sadly, too many people who experience disaster on a large or small scale may find the trauma continues when it’s time to file an insurance claim.

Paul K. Improta of Underwriters, Inc. offers the following myths involving typical homeowners coverage that could minimize re-traumatizing already shaken homeowners when it’s time to file a claim.

Myth 1: Wear and Tear Is Covered
Fact: Coverage typically includes damage from fire, weather and theft, not damage due to general wear and tear or neglect. As a policyholder, Improta says it’s up to you to maintain your home, including making routine repairs and protecting your home from pests.

Myth 2: You’re Safe in Case of Flood Damage
Fact: Although some weather-related damage is generally covered, such as from hail, Improta says other natural disasters may not be.

Floods require specific flood insurance.
Earthquakes might be covered, but sometimes they require additional insurance.

Myth 3: All Personal Belongings Are Fully Covered
Fact: Homeowners insurance typically covers furniture, clothing and other personal items, but more valuable items like jewelry and artwork may require an add-on policy. Improta advises homeowners to routinely inventory belongings to determine if policy limits meet their coverage needs.

Myth 4: You Have Protection Against Any Injuries That Happen at Home
Fact: Your policy’s liability coverage protects you if a guest is hurt in your home, but if a family member is injured at home, it’s normally covered by health insurance.

Myth 5: Home Businesses Are Part of the Package
Fact: A home business requires business insurance to cover property damage and liability, Improta says.

Ultimately, homeowners should consult with their insurance carrier or agent to be sure they’re fully covered from disasters large or small.