If you are financing your purchase, your lender will require you to get homeowners' insurance. It just makes sense to get homeowners's insurance. Homeowners insurance can pay for repairs if your home is damaged by a storm, fire, or other disaster or if you’re a victim of theft or vandalism. Even if you are paying cash, you should get homeowners' insurance - but how much will it cost? Insurance rates can vary widely from home to home - based on many factors, including the location of the property and whether there have been previous claims filed on the property. Don't be surprised a few days before closing when you discover that that dream house has a nightmare price tag for insurance.
Most people understand that the region where they live is important because certain parts of the country experience more tornadoes, hurricanes, earthquakes or wildfires than others. Many people don’t realize, however, that homeowners insurance rates can vary widely from one neighborhood to another.
Neighborhood-Specific Factors That Can Affect Insurance Rates
Proximity to emergency services can impact homeowners insurance rates. If you own a home near a police station, officers could respond quickly if someone broke into your home. Speedy action by the police may catch the thief before your valuables disappear. Thieves might decide to skip your house altogether and target one farther from the police station. From an insurance company’s perspective, your home would be less risky to insure than one a few streets over, or even one down the street.
Fires are a frequent source of homeowners insurance claims. A house that’s just a few minutes away from a fire station could have much lower insurance rates than one 10 minutes away because a fire could be extinguished much faster and damage could be minimized at the closer house.
Some cities have several police and fire departments that serve different neighborhoods. Depending on where the lines separating jurisdictions are drawn, your neighbors across the street could be served by different departments than you are. That means one house could have emergency responders around the corner, and the other might have to wait longer for help to arrive. That could affect homeowners insurance rates.
Crime rates of course impact the homeowner insurance premiums. High crime areas will have higher rates than those with low crime rates. Neighborhoods with lots of security systems in the homes will have lower insurance rates as will areas with neighborhood watches.
Insurance companies base their rates, in part, on how much money they’ve recently paid out in claims. If several of your neighbors have filed claims for vandalism or theft, that could affect everyone’s rates.
Get a C.L.U.E Report on Your New Home
Insurance rates can also vary depending on whether the current owner has filed several claims on that dream home you want to buy. How do you find out whether that has happened? Ask for a C.L.U.E. Report!
There are two major property claim databases that contain loss history reports, C.L.U.E. (Comprehensive Loss Underwriting Exchange) and A-PLUS (Automated Property Loss Underwriting System). Most people refer to the reports generated by either system as C.L.U.E. reports because they are most often used by insurance companies. The C.L.U.E. database, owned by LexisNexis, enables insurance companies to access information on claims that have been filed within the last seven years.
When you apply for home insurance, your insurer will request a loss history report to determine whether you, the buyer, or the seller have filed any claims during the past seven years. The database also includes damage reports that were later closed when the owner made the repairs himself.
The Fair Credit Reporting Act guarantees you the right to receive a free copy of your loss history report if you are denied insurance due to information contained in it. Additionally, if you have a dispute with an insurer about the information in the report, you can ask that your account of the events be included in the report. You can order a free copy of your C.L.U.E. report once every 12 months.
CLUE reports are helpful to the seller and the buyer
When buying a home, you can request a C.L.U.E. report from the seller as a condition of the sale. It also is possible for the listing agent or seller to order a home seller's disclosure report at the time of listing which will show potential buyers the loss history for that property. Buyers will feel better knowing that the property has not experienced a history of damage in the past which might have been covered up by a devious seller. If the report for the property indicates that insurance losses haven't occurred within the past five years, the buyer can feel comfortable that insurance loss history of the property should not impact the availability or pricing for home insurance.
Ways to Lower Your Premiums
Many of the factors that homeowners insurance companies consider when setting their rates are beyond your control, but you might be able to make some changes to reduce your premiums. If you live in a high-crime area, installing a security system, improving lighting in the yard, trimming bushes so burglars can’t conceal their activities, and making other security improvements could lower your rates. If you aren’t sure why your insurance premiums are so high, contact your carrier to get some insight and figure out if you can make changes to your property to lower your rates.