The issue of selecting an insurance carrier when purchasing a new family home does not receive significant attention from many homeowners. Sometimes purchasers simply stick with the prior carrier that has provided coverage for the premises. However, the selection of a carrier to provide financial protection of what might be a family’s most valuable asset poses issues that require more careful consideration. When new home buyers invest in a residence, proper analysis of these potential issues can mitigate the risk of future unpaid claims, unanticipated coverage gaps, inadequate policy limits, and excessive premiums. In this blog post, I provide strategies for new home buyers to reduce the risk of unanticipated homeowner insurance purchasing surprises.
Many people are blissfully unaware that a prior owner’s insurance claims for damage to a residence can impact a buyer’s homeowner’s premiums. If the insurer has paid claims for loss filed by the prior property owner, such claims can mean that a subsequent purchaser faces higher homeowner’s insurance premiums. While the repairs arising out of the claim might be apparent based on property disclosures made during the home transfer, there are other cases where the basis for the increased premium is less apparent. Sometimes a homeowner might consider filing a claim but decline to move forward.
For example, the flooring in the bathroom of a home might be damaged by a leaky faucet. When the prior homeowner inquires with the carrier about filing a claim, the value of the claim is determined to be only $500 while the deductible under the policy is $600. Given that the amount of the claim does not exceed the deductible amount, the claimant repairs the damage without pursuing the claim. When a buyer subsequently attempts to purchase the home, the buyer’s homeowner’s insurance application is denied based on two claims being filed within the preceding three year period. While the buyer was aware of a prior paid claim for a roof repair following a severe storm that dislodged multiple tiles, there is no mention of the faucet since no claim was actually pursued or paid. However, the homeowner learns that obtaining coverage will be more difficult and costly because the insurance carrier created a claim file on the faucet based on the telephone call. These telephone inquiries can and are sometimes used by insurers, so purchasers should explore premium amounts with the insurer, which will be determined partially by claim history, prior to consummating the sale.
Insurance carriers are able to track claim history because property claim databases exist to provide this information. Two common resources that insurers often use are the Comprehensive Loss Underwriting Exchanges (CLUE) and the Automated Property Loss Underwriting System (A-PLUS). Insurers evaluating an application for coverage will routinely consult such resources for information on the number and value of claims made during the years preceding the sale and application for coverage. The insurer also will explore claims made by the home buyer even though those claims were not for the subject premises. Although a prospective home buyer cannot purchase these reports, a prudent alternative is to request that the seller obtain and provide this report as a condition of the sale.
When a prospective policyholder requests these type of reports, the purchaser is in a superior position to make better home buying decisions. The report provides information regarding damage to the home in the past and maintenance issues. Information in the report also can assist the buyer in determining whether repairs have been performed in a workmanlike manner. Similarly, disclosure of incidents involving burglary of the premises can guide a the purchaser in determining whether proper security measures have been implemented to make the home safe, including installing deadbolts, alarms, motion sensors, security lights, and other features designed to prevent future incidents. If these steps have not been taken, the purchaser has information needed to make an informed decision about moving forward with the sale, negotiating appropriate remedial measures, or seeking a modification in the sale price.
If you have questions about an insurance claim, you are invited to contact our law firm to speak to an experienced Miami insurance claims attorney. My law firm specializes in representing policyholders in claims disputes in Miami and throughout Florida. Click here to read about some of our case results. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations. No Recovery, No Lawyer Fees. Call 305-461-1095 or Toll Free 1-866-71-CLAIM.