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Up Level

You really need to read this information.

Did you know that even talking to your insurance agent
about a possible claim can cost you? And, like a
credit report, you can get a free copy of your house's

Insurers keep a secret history of your home

A huge database not only tracks claims, it also looks
for risks -- which could cause dropped coverage and
other nightmares for homeowners.

By Liz Pulliam Weston

You probably know that it's not a good idea to make
too many claims on your homeowners insurance policy, because your insurer could drop you.

What you might not know is that a claim could make
selling your home more difficult down the road. What's
more, you could find your home's value damaged or a
sale jeopardized even if a previous owner, and not
you, made a claim.

Insurers increasingly are using a huge industry
database, called the Comprehensive Loss Underwriting
Exchange, or CLUE, to drop or deny coverage based on a home's history of claims or damage reports.
Insurance companies are terrified of rising losses
from water and mold damage. So a single report of
water-related problems may be enough for insurers to
shun your home.

Jan and Kevin Garder of Bremerton, Wash., discovered
this the hard way. The Garders thought they were doing
the right thing when they told their insurance
company, State Farm, about some minor water damage caused by a rainstorm last year.

Consumers held hostage

The couple, who say they had been with their insurer
for 30 years without filing a claim, ultimately
decided not to file one this time, either.

That didn't stop State Farm from dropping them as
customers, they say. Not only that, but they say State
Farm also shared the damage information with the CLUE database. When the Garders applied for coverage elsewhere, the other insurers cited State Farm's damage report as the reason they wouldn't write a policy, Jan Garder said."Until then, we didn't know anything about the CLUE database," she said. "We really didn't have a clue."

State Farm declined to comment on the Garders' case,
citing privacy concerns. Spokeswoman Lisa Wang said the insurer shares only claims information with CLUE, not damage reports.

But the company that operates CLUE, Choice Point of
Alpharetta, Ga., said that the database collects
damage reports as well as claims. The information
stays in the database for up to five years, said James
Lee, ChoicePoint's chief marketing officer.

The Garders say they finally secured bare-bones fire
coverage for about $1,000 a year, more than three
times what they paid previously for full homeowners
coverage. What's more, the problem is derailing their
plans to sell their home. The Garders say they have
been told by their real estate agent and others that
they may have a tough time getting a good price for a
home that's already been rejected by many insurers.
"You are totally blackballed," said Jan Garder. "They
should not be able to hold a consumer hostage like

Insurance companies get aggressive

In previous years, insurers used the CLUE database in
large part to watch for fraud and for consumers who
had a history of filing numerous claims.

After losing billions of dollars on homeowners
insurance in recent years, however, insurance
companies have become more aggressive about screening for other risks -- including damaged homes that could spawn future claims.

The nation's largest property insurers have dropped
thousands of policyholders from coast to coast and
stopped writing homeowners insurance in more than a
dozen states. Allstate, for one, will no longer write
policies in California and states along the Gulf Coast
and Eastern Seaboard.

So far, insurers' increased use of the CLUE database
has not caused serious problems for the booming real
estate industry, said George Tribble, a member of the
National Association of Mortgage Brokers' board of

But Tribble said he has heard a number of anecdotal
reports of residential sales falling through at the
last minute because of CLUE-related problems in
securing insurance. He fears the problem could get
worse if insurers begin to shy away from homes that
have had even minor damage.

"Right now, it's still a pretty isolated problem,"
Tribble said, "but that could change if (insurers)
continue to do this. If you're not able to get
insurance, you're not able to close the deal."
Tribble thinks it's particularly unfair that a home
could be blackballed because of one claim, let alone a
single report of damage that didn't lead to a claim.
"Insurance companies want to keep their costs down,
which is understandable," Tribble said, "but this is
what you have insurance for -- to cover you for
accidents."The insurance industry is notorious for its
manic-depressive cycles. In profitable years,
companies will slash premiums, boost coverage and take on big risks in hopes of gaining market share.
When those risks start costing real money, the
companies sound the full retreat -- hiking premiums,
dropping customers and shunning risk.
How to protect yourself

While you can't do much about insurers' overreactions,
you can do something to protect yourself in this
particularly difficult time. Among them:
Keep your home in good repair. A solid, watertight
roof, good plumbing and a decent paint job can protect
your home from various water disasters. It's a good
idea to regularly check the hoses on your washing
machine and dishwasher, because cracked or burst hoses often lead to serious water damage.
Keep your deductible high. Pay for smaller expenses
out of your own pocket. Homeowners insurance should be reserved for the big disasters, not the little
problems you can easily pay for yourself.

Think twice about water-related claims. This is
especially true if you plan to sell within a few
years. You could be better off paying to repair the
problem yourself rather having your home be branded as high risk.

Don't tell your insurer about problems unless you're
sure you'll file a claim. This last piece of advice is
unfortunate, because insurers and insurance agents can be a decent source of counsel on whether it's worth filing a claim. Because any damage you report could be passed on to the CLUE database, however, it's smart now to err on the side of caution.

Consider getting a copy of your CLUE report. You're
entitled to a free copy of your home's CLUE report
every year or if you've been denied insurance. You
have a right under federal law to dispute any
erroneous information on the report.

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