First, lets just clear something up… The Claims History is NOT the same as a CLUE report.
We do not get a CLUE report from the insurance company. A CLUE is a Comprehensive Loss Underwriting Exchange report.
A CLUE report will give you the claims history, sure, but the actual CLUE also contains private and secure information that would be illegal for an insurance agent to just hand out.
What we get in real estate is very similar… without all that illegal stuff.
The Claims History report is also known as a Letter of Experience in the insurance world. It tells a story of the experience the property has had in regards to insurance claims.
In some cases, a claim may reveal something to a buyer, such as a history of leaks, water damage that should be investigated, or perhaps multiple burglaries.
Some insurance underwriting programs will deny insurance on a home based on the past claims as well, so it’s important to know if the homes history will cause the buyer extra expenses and head ache.
These reports may take anywhere from 10 minutes to 3 days to obtain, so it’s best practice for the seller to have that up front, but at the very least, order it immediately after going under contract.
In the contract, the seller must have the Claims History to the buyer within 5 days of contract acceptance.
Just like any other disclosure, the buyer has 5 days to review this report and reject the property if something is to their disliking. If the report comes back with 3 past burglary claims… the buyer may walk, even if their inspection period has past.
Insurance companies underwrite their policies differently. Some will base it purely off the person and their credit, while some base it off the home and it’s history.
If there is a claim on record, buyers should ask for more information on what the issue was and how it was resolved. If a claim is for water damage, they may want to investigate to ensure it was fully an properly taken care of.
What happens if you don’t have insurance?
The contract states that the Claims History is provided…. that means, if there was no insurance, therefore, no claims… a letter from the owner, stating that there have been no claims, is sufficient.
What if you’ve changed insurance companies?
Whether you have had 1 or 7 insurance companies in the last 5 years, you need to provide a history report of 5 years. If that means going to 7 different companies to request a report… that’s what you’ll have to do.
Who orders the Claims History?
Typically the current owner is the one that has to request the claims history. Some companies will allow their agent to request it, but it’s rare. The best practice is to make sure that the seller requests it as soon as possible and instructs that a copy to to the agents email address.