Insurance When Buying A Used Home

Posted by: Sep 12, 2014By Brian Stutheit

Homeowners insurance records provide a potential source of information about the history of a house.

The C.L.U.E.® Home Seller’s Disclosure Report  is an independent source of information about insurance losses at a home address within the past five years. If the home has not experienced a loss (a filed claim) within the past 5 years, the report can provide comfort to a potential buyer. When there are no losses associated with a property the report would state that no losses were found for the address shown.  The C.L.U.E.® Home Seller’s Disclosure Report will include for any listed loss: date of loss, loss type, status, amount paid, policy type and insurance company name.  A buyer is not entitled to obtain a C.L.U.E. report for an address, but the buyer can ask that the seller provide the report, and make purchase of the property contingent on receiving a satisfactory C.L.U.E. report.  Talk to your realtor about obtaining such a report.  This provides protection to the buyer against fraudulent non-disclosure, and protects the seller against claims something was not disclosed.  The report should not take the place of having an inspection by someone independent and qualified.  See our blog posted October 31, 2012  about the dangers in hiring  typical property inspectors.

Make sure you understand what sort of property damage insurance you will be buying on your house.  Replacement cost provides you with the dollar amount needed to replace a damaged item with one of similar kind and quality without deducting for depreciation—the decrease in value due to age, obsolescence, wear and tear and other factors. An actual cash value policy pays you the amount needed to replace the item minus depreciation. Suppose, for example, a tree fell through the roof onto your eight-year-old washing machine. If you had a replacement cost policy for the contents of your home, the insurance company would pay to replace the old machine with a new one. If you had an actual cash value policy, the company would pay only a percentage of the cost of a new washing machine because a machine that has been used for eight years would be worth less than its original cost.