Homeowner's Insurance Coverage & Common Claims

The majority of homeowners have insurance on their properties. It’s required if you have a mortgage on the property, but optional if you pay cash or have paid off the mortgage. Mortgage companies require insurance so they do not lose money if the property is damaged.

What Does Homeowners Insurance Cover?

In general, home insurance covers most issues such as flood damage, fire damage, and may include liability coverage, which is needed if a person is injured on your property and you need to make a claim to pay that person’s medical expenses.

What are the Most Common Home Insurance Claims?

One of the most common claims against homeowner’s insurance is a broken pipe. In that situation, if the leak is not discovered immediately, water damage can destroy a family’s belongings as well as damage the structure of the home, resulting in a massive claim and months of repairs. Similarly, a fire that is not contained and extinguished can do tremendous damage by both the fire itself and the smoke, which may require disposing of affected furniture and belongings. It’s important to read and understand your policy so you know what is covered, and avoid any type of insurance fraud.

Living in another place while your home is repaired may also be covered under your insurance policy. Check the terms of your policy to find out.

Many parts of the country have regional issues that require additional insurance. For instance, places close to the coast may require additional flood insurance for hurricanes, and properties in states prone to earthquakes require specific insurance to handle any related damage.

Are Insurance Policies Public Record?

The short answer is no, a homeowner’s policy is not a public record. However, it’s possible in some states to discover another person’s insurance company through public documents and,if necessary, to raise the possibility of a third-party claim directly to the company (for instance, if you sue to make a property owner pay for injury or damages caused by some aspect of his property). Some states may require homeowners to record their insurance companies with the local tax office. This aspect of the record is public.

Parts of a homeowner’s policy

When you sign a contract with an insurance agency or company for a homeowner’s policy, it should have the following components:

• A declaration that spells out who is insured, the location of the property, the amount of insurance, the value of the policy, and a description of the property (such as a home with a garage, or barn, etc.);
• Coverage statement that describes exactly what structures or features are covered and the value or extent of the coverage, as well as the types of coverage (liability vs. property);
• Exclusions statement that spells out what is not covered by the insurance policy;
• Conditions statement that details the responsibilities of the homeowner and the insurance company as well as the procedure for making a claim and for the company deciding whether to cover the claim;
• Endorsements that may affect the extent or cost of the coverage.

What Does Liability Coverage Mean?

If another person is injured while on your property, he may ask you to pay his medical expenses. This may be covered by your insurance policy. However, if the coverage is denied because the injury was caused by negligence or lack of maintenance (such as allowing a floor to rot so the person fell through a hole) you may both have to pay the injured person’s medical expenses and have to pay more for insurance in the future due to the negligence.

Getting a CLUE

If you’re a homeowner, there’s a document that’s important to know about, called a CLUE, or Comprehensive Loss Underwriting Exchange. While it’s not a public document, it can affect the future sale of your home (or your purchase of a home).

What is a Clue Report?

The CLUE is a record created by homeowner’s insurance companies that is shared with other insurance companies. It records how many and which type of claims you’ve made against your policy, including any potential claims that you discussed with company representatives and any claims that were rejected.

Insurance companies may share this record of information in order to set your insurance rate (cost of your policy) in the future, even if your future policy is not with the same company. The CLUE record is kept on file 5-7 years. It’s a private document that may be treated more like a public document if you release it to your realtor while trying to sell the property.

Why a CLUE is important?

When you sell your home, the prospective buyer may ask for a copy of your CLUE to get information about any damage that was done to your home in the recent past. The document is only available through you, as your insurance company may not provide the information without your consent.

It’s important to check your CLUE document before selling your home to ensure the information included is accurate and does not include damaging information that you may be able to have redacted before a potential buyer sees it.

A CLUE will show situations in which the insurance company attributes a claim to poor maintenance of the building. For instance, if the roof leaks but cannot be attributed to a tree falling on it, your homeowner’s insurance is unlikely to pay a claim for water damage. A prospective buyer may decide not to purchase the property if maintenance issues are a concern.