When buying a new home or investment property, it’s crucial to investigate potential issues before purchasing. One essential step is obtaining a Comprehensive Loss Underwriting Exchange (CLUE) report from the sellers. This report reveals any previous insurance claims, including damages and thefts, and can help you assess the property’s history and potential red flags.
What Is a CLUE Report and How Does It Work?
A CLUE report plays a crucial role in real estate transactions by providing a comprehensive overview of homeowners’ insurance claims made on a property within the past seven years. LexisNexis Risk Solutions, a consumer reporting agency, generates CLUE reports. Lexis Nexis maintains the CLUE database in keeping with Federal Fair Credit Reporting Act guidelines and contains essential information like:
- Personal details of the insured
- Policy number
- Type of loss
- Date of loss
- Claim status
- Amount paid
- Property or information
Requesting a CLUE report while buying real estate offers several advantages. By reviewing the report, potential homebuyers gain insights that can bring peace of mind or raise concerns related to the property. Multiple personal property claims filed within the past seven years could be a red flag, for instance, indicating underlying issues or the property’s age. A history of flood or storm damage claims may necessitate further investigation for mold, while multiple break-ins or theft claims could signal a less desirable location or security concerns.
On the other hand, if a claim results in significant improvements, such as a new roof or siding, it alleviates future maintenance expenses for the buyer. To make an informed decision, it’s essential to have a licensed inspector conduct a thorough home inspection.
It’s important to note that home CLUE reports do not include:
- Credit reports
- Credit scores
- Civil records
- Criminal records
- Eviction notices
Claims remain on a CLUE report for five to seven years.
What’s in a CLUE Report?
A CLUE report contains detailed information about insurance claims associated with a property or individual. The report includes the following key details:
- Personal information: The policyholder’s details, such as name, date of birth, and contact information, are included in the CLUE report.
- Policy information: The report provides information about the insurance policy associated with the property or individual, including the policy number and insurance company name.
- Claims information: The CLUE report lists the claim number, type, and date of loss for each insurance claim filed. It provides specific information about the nature of the claim, such as fire damage, water damage, theft, or other incidents.
- Claim status: The report indicates the status of each home insurance claim, whether it was paid, denied, or remains open for potential settlement.
- Amount paid: It also includes information on the amount paid by the insurance company to settle each claim. This can help assess the severity of past incidents and potential property damages.
- Insured property information: CLUE reports include details about the property, such as the property address and type.
Sometimes, you may encounter a blank CLUE report when assessing a property. This typically indicates a few possibilities:
- It could mean the homeowner has not filed any insurance claims recently.
- Alternatively, since not all home insurance companies report claims to the CLUE database if the property was insured by a company that doesn’t do so, the CLUE report may come out as blank.
- Further, a blank CLUE report doesn’t necessarily imply that no damage has occurred. It means no insurance claim was filed or reported, and the owner may have addressed any damages out of pocket.
How to Get a Copy of Your CLUE Report
The property owner or an insurance provider can obtain a copy of the CLUE report. If you’re planning to buy a rental property or a home and want to review the CLUE report, you’ll need to ask the owner to request it. As a property owner, you can request a free report by phone or mail from LexisNexis once a year. Additionally, sellers can request a special version of the report called a CLUE Home Seller’s Disclosure Report to provide potential buyers with a five-year loss history of the property.
The information provided in CLUE reports is fact-checked and verified by insurance companies to ensure accuracy and reliability. However, if you find mistakes in your CLUE or home history report, fixing them as soon as possible is essential. You can dispute incorrect or incomplete information by contacting LexisNexis, who must work with the insurance company to correct errors. Any information on your report that can’t be confirmed within 30 days must be removed from your CLUE report.
What to do With a CLUE Report
Understanding how to use a CLUE report effectively is essential for homebuyers, sellers, and property investors. Here are some things to keep in mind.
As a prospective buyer or real estate investor:
- Request a CLUE report from the property owner as part of your due diligence process. (Your mortgage lender may also request the report before finalizing the loan.)
- Review the CLUE report to see if any insurance claims have been filed on the property in the last seven years.
- Pay attention to the types of claims filed, such as storm damage, water damage, theft, or fires.
- Investigate further if multiple claims have been filed, as it may indicate potential underlying issues or property-related risks.
- Compare the information from the CLUE report with other property inspections and assessments.
- Discuss the claims and their impact with the current owner to gain more insight.
- Address any concerns or potential issues highlighted in the CLUE report during negotiations or inspections.
- Consider the implications of the claims on the property’s condition, maintenance, and future insurance coverage.
- If necessary, consult with an insurance agent or get insurance quotes from insurance providers to understand how the claims history may impact future coverage and insurance premiums.
- If you’re a real estate investor, incorporate the findings from the CLUE report into your overall risk assessment and investment strategy for the property. This is all the more important when buying your first rental property.
As a seller:
- Obtain a CLUE report for your property to understand its insurance claims history.
- Review the report carefully to ensure accuracy and address discrepancies.
- Understand the potential impact of the claims history on the property’s value and marketability.
- Consider addressing any issues or recurring patterns identified in the CLUE report before listing the property.
- Use the CLUE report to showcase the property’s favorable claims history when applicable.
- Provide the CLUE report to potential buyers upon request to create transparency and build trust.
- Be prepared to discuss the claims history with potential buyers and address any concerns they may have.
- Use the CLUE report to highlight any improvements or repairs made following previous claims. This is especially important if you plan to flip the property soon after purchase.
How do CLUE Reports Affect Your Homeowners Insurance?
CLUE reports can have an impact on your homeowners insurance in several ways:
- Premiums: Insurance companies use CLUE reports to assess the risk of insuring a particular property. If the report shows a history of frequent or significant claims, it may lead to higher premiums, as the insurer considers the property more susceptible to future claims.
- Coverage: A CLUE report indicating many past claims or specific types of claims, such as water damage or theft, may raise concerns for insurance companies. In some cases, insurers may limit coverage options or decline coverage altogether based on the property’s claims history.
- Claims history: When assessing your eligibility for coverage and setting premiums, insurers often consider your personal claims history as well. If you have a track record of filing claims, especially within a certain timeframe, it may result in higher premiums or limitations on coverage.
- Risk assessment: CLUE reports help insurers evaluate the overall risk associated with the property. Claims related to severe weather events, such as hurricanes or floods, could indicate a higher risk of future damage, potentially leading to increased premiums or specific coverage requirements.
A CLUE report that shows no or minimal claims can positively impact your homeowners insurance. It may lead to lower insurance rates or reassure insurers that the property has a lower risk profile. It’s important to note that each insurance company has its own underwriting guidelines and methods for using CLUE reports. The specific impact on your homeowners insurance will depend on the insurer’s assessment provided in the report.
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The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. The views reflected in the commentary are subject to change at any time without notice. View Arrived’s disclaimers.
